by Peter Irons
Many who became casualties of the Crash spent their days scrabbling for survival. Social critic Edmund Wilson described their privation: “There is not a garbage-dump in Chicago which is not diligently haunted by the hungry. Last summer in hot weather when the smell was sickening and the flies were thick, there were a hundred people a day coming to one of the dumps, falling on the heap of refuse as soon as the truck had pulled out and digging it in with sticks and hands.” Others took to the streets in protest; newspapers carried daily reports like this: “Indiana Harbor, Indiana, August 5, 1931: Fifteen hundred jobless men stormed the plant of the Fruit Growers Express Company here, demanding that they be given jobs to keep from starving. The company’s answer was to call the city police, who routed the jobless with menacing clubs.” Another story: “Chicago, April 1, 1932: Five hundred school children, most with haggard faces and tattered clothes, paraded through Chicago’s downtown section to the Board of Education offices to demand that the school system provide them with food.”
Not even the Depression shook President Hoover’s belief that “poor relief” should come from private charity and not from public funds. He did support the Reconstruction Finance Corporation, which made loans to banks and businesses, and near his term’s end he finally heeded calls for federal grants to local governments for relief programs. But this was all too little and too late to stave off widespread poverty. After beating one New York governor, Al Smith, during the boom year of 1928, Hoover lost badly to another, Franklin D. Roosevelt, after the defection of six million Republican voters in 1932. Roosevelt brought a patrician’s touch and tone to politics, but his appeal to the “common man” rose above class and party. “The country needs, ” he declared in 1932, “and, unless I mistake its temper, the country demands bold, persistent experimentation.”
Before he turned the government over to Roosevelt and the “New Dealers” who rode his coattails to Congress, Hoover added three members to the Supreme Court that would decide if their legislative experiments would blow up the Constitution. The resignation of Chief Justice William Howard Taft in February 1930, a month before he died, gave Hoover a chance to shift the Court’s direction from the right to the center. Hoover had formed a close friendship with Justice Harlan Stone, and many observes thought he would elevate Stone to the Chief’s position. But Taft literally whispered from his deathbed into Hoover’s car, urging the president to appoint Charles Evans Hughes as his successor. Taft had placed Hughes on the Court in 1910 and, despite their later political rivalry, considered him more “solid” than Stone in defending business interests. After resigning from the Court in 1916 to make an unsuccessful run for the White House, Hughes had joined a powerful Wall Street firm, which exposed him to criticism from “progressive” senators in both parties. “No man in public life,” declared Senator George Norris of Nebraska, “so exemplifies the influence of powerful combinations in the political and financial world as does Mr. Hugues.” But the Senate confirmed Hughes by fifty-two to twenty-six, in contrast to the unanimous vote for his first term.
Two weeks after Hughes took the Court’s center seat, Justice Edward Sanford died. Hoover’s first choice to replace him was John J. Parker of North Carolina, a federal appellate judge who had carried the Republican banner in state politics. One remark he made as the party’s candidate for governor in 1920 returned to doom his nomination. Black voters had long backed the party of Lincoln, but Parker rejected their support: “The participation of the Negro in politics is a source of evil and danger to both races,” he stated. Parker had also followed Supreme Court precedent as a judge in upholding “yellow dog” employment contracts. The combined opposition of the NAACP and organized labor kept him off the Court by the narrow margin of two votes. Forced to choose a less controversial nominee, Hoover turned to Owen J. Roberts of Pennsylvania, a wealthy and well-connected corporate lawyer who had garnered praise for serving as special prosecutor in the Teapot Dome scandals that rocked Washington in the 1920s. Roberts had no judicial experience, but senators were tired and bruised from the Parker battle and confirmed him without dissent. He came to the bench with no exposure to constitutional law, and he sailed without a compass through the New Deal storms that soon battered the Court.
An era in American law ended on January 12, 1932, with the resignation of Justice Oliver Wendell Holmes. Still alert at ninety, he stepped down after twenty-nine years, bequeathing not only the funds to underwrite a multivolume history of the Supreme Court, but also a major part of that history in his many opinion. Holmes once wrote that he wanted “to put as many new ideas into the law as I can, to show how particular solutions involve general theory, and to do it with style.” His constitutional theory may have lacked rigor and consistency, but he certainly put forth new ideas with inimitable style.
Holmes could hardly be replaced, but President Hoover satisfied his many admirers by selecting Benjamin N. Cardozo of New York to succeed him. Like Holmes, Cardozo had gained renown as a legal scholar and as chief judge of his state’s highest court. His 1921 book The Nature of the Judicial Process recognized the human element in judging and the changing social and economic forces that influence legal rules. Unlike Holmes, who barked back to the “common law” for guidance, Cardozo looked ahead to statutory law and administrative regulations as signposts for the future. Hoover first hesitated in making his choice, fearing that adding another Jew to the Court—to join Louis Brandeis—would have “religious or sectarian repercussions,” but the outpouring of support for Cardozo overcame this caution. The Senate confirmed him unanimously, and the New York Times approvingly commented that “seldom, if ever, in the history of the Court has an appointment, been so universally commended.”
After Franklin Roosevelt took office, Cardozo joined Brandeis and Stone in the Court’s “liberal” wing, generally voting to uphold federal and state laws designed to aid workers or consumers. Justices McReynolds, Van Devanter, Sutherland, and Butler had already formed a solid wall of resistance to such laws. This split left Chief Justice Hughes and Justice Roberts in the middle as swing votes. Either one could join the conservatives to strike down laws, but it took the votes of both to uphold them. This judicial arithmetic put the fate of New Deal legislation in the hands of two former corporate lawyers and staunch Republicans.
Eager to carry out Roosevelt’s electoral mandate, Congress plunged into the “Hundred Days” session in March 1933, determined to revive both industry and agriculture. Scores of young lawyers—derided as “boys with their hair ablaze” by one critic—worked around the clock to draft the National Industrial Recovery Act and the Agricultural Adjustment Act, the twin pillars of the New Deal program. Congress wrapped up work on the NIRA and AAA bills by June 1933 and sent them to the White House for Roosevelt’s signature These laws certainly fit Roosevelt’s prescription of “bold experimentation.” in treating a sick economy, but they rested on shaky constitutional ground. Both laws faced challenges in federal courts within days, but these suits—dozens were filed against each statute—had to climb several rungs on the judicial ladder and did not reach the Supreme Court until 1935. However, many states passed their own “Little New Deal” laws in early 1933, and challenges moved rapidly through state courts. Two important cases—from Minnesota and New York—were ready for Supreme Court argument in late 1933 and were closely watched for cases were, in fact, “big” in the sense that they affected millions of homeowners and consumers, not only in Minnesota and New York but in states with similar laws.
The first case began when the Minnesota legislature passed a “mortgage moratorium” law in April 1933. It extended for up to two years the period in which homeowners could “redeem” property foreclosed by mortgage holders by making payments set by a judge. The law’s preamble declared that “the severe financial and economic depression existing for several years” had created “an emergency of such nature” that justified use of the state’s “police powers” to protect homeowners who could not “mee
t all payments as they come due” on mortgages. The Supreme Court confronted a challenge to the Minnesota law in a case that stemmed from one of thousands of foreclosures during the Depression. John H. Blaisdell obtained a $15,000 mortgage for a house in Minneapolis from the Home Buildings & Loan Association; he and his family lived in three rooms and rented the others. Blaisdell fell behind on payments the next year when his tenants lost their jobs. Home Building foreclosed and purchased the house and lot at auction for $3,700. Two weeks before his “redemption” period expired, the moratorium law took effect; Blaisdell ran to state court and got an extension for two years, conditioned on mortgage payments of $40 each month.
Home Building’s lawyers objected at the state court hearing that the moratorium law violated the “impairment of contract” clause of the federal Constitution and did not fall within the state’s police powers. The company won this round, and Blaisdell sued to reclaim his property. After the state’s highest court ruled for Blaisdell and upheld the law, Home Building appealed to the Supreme Court, which issued its ruling in January 1934. In this closely watched case, Chief Justice Hughes and Owen Roberts sided with the Blaisdell family and upheld the Minnesota law over the dissent of the Four Horsemen of Reaction.
Conscious of the case’s impact, Hughes took the opinion in Home Building & Loan Assn. v. Blaisdell for himself. “The Constitution was adopted in a period of grave emergency,” he reminded his readers. “While emergency does not create power, emergency may furnish the occasion for the exercise of power,” he continued. Conceding that the Minnesota law did “impair” Home Building’s contract with John Blaisdell, Hughes stated that “where constitutional grants and limitations of power are set forth in general clauses, which afford a broad outline, the process of construction is essentially to fill in the details. That is true of the contract clause.” Hughes did not explain how the Minnesota law filled in any “details” of the Contract Clause. He met another problem by distiguishing the “insolvency” cases decided a century earlier, noting that Blaisdell’s debt to Home Building was not wiped out, but merely extended for two years.
In effect, Hughes had filled in the Contract Clause with compassion for people like John Blaisdell. The Four Horsemen responded in a scornful dissent by Justice George Sutherland. “The Minnesota statute either impairs the obligation of contracts or it does not,” he wrote. Even Hughes conceded that it did. Sutherland did not find an “emergency” exit in the Contract Clause. States could not impair contract rights “no matter what may be the occasion,” he declared. Looking ahead with foreboding, Sutherland warned that Hughes had opened the door for “gradual but ever-advancing encroachments upon the sanctity of public and private contracts.”
Two months after the Home Building decision, the Court upheld another state law, this one designed to save New York’s dairy farmers from what lawmakers called their “desperate” situation. The problem was not too little milk for the state’s consumers but too much. Swelling production and shrinking consumption had reduced the price that farmers received far below cost. The state legislature held extensive hearings on the problem and passed a law in April 1933 that established a state milk control board with the power to fix minimum and maximum prices for milk sold in retail stores. The board fixed the price of a quart at nine cents. However, dealers who delivered milk to homes were not covered by the law and generally sold a quart for eight cents; their customers got better service and lower prices. Leo Nebbia, who ran a grocery store in upstate Rochester, fought back by selling a five-cent loaf of bread with two quarts of milk eighteen cents, in effect, he gave the bread away to lure customers into his store. Nebbia volunteered to bring a “test case” on behalf of fellow grocers, and the county attorney arranged a quick trial at which Nebbia was convicted and fined $25. The state’s highest court rejected Nebbia’s claim of a “liberty” right to set his own prices and upheld the law on “police powers” grounds, and he appealed to the Supreme Court.
The stakes in Nebbia v. New York, were much greater than a nickel loaf of bread. Price-fixing was an essential part of the New Deal program; the National Industrial Recovery Act set up “codes of fair competition” for a thousand different industries that restricted competition with fixed prices. The Court’s ruling on a state law might forecast its decision when the NIRA came up for review. The justices lined up in Nebbia as they had in the Home Building case. This time, however, Owen Roberts wrote for the Court and James McReynolds for the Four Horsemen. Roberts did not need an “emergency” exit in this case; he cited the 1877 ruling in Munn v. Illinois for the proposition that property rights are not absolute. “Equally fundamental with the private right is that of the public to regulate it in the common interest,” Roberts wrote. So long as laws were not “arbitrary in their operation and effect,” he continued, “the state may regulate a business in any of its aspects, including the prices to be charged” to consumers.
McReynolds saw clearly the majority’s implicit overruling of the Lochner and Adkins cases, although Roberts had not cited either decision. Laissez-faire doctrine was in such grave peril that McReynolds signaled his alarm with exclamation points. He pictured a mother who did not have nine cents for a quart of milk although the grocer “is anxious to accept what you can pay and the de mands of your household are urgent!” The Court’s “facile disregard of the Constitution as long interpreted and respected will inevitably lead to its destruction,” McReynolds warned. “Then, all rights will be subject to the caprice of the hour; government by stable laws will pass.”
Defeated in these skirmishes over state legislation, the Four Horsemen refused to surrender to the New Dealers and regrouped for the looming battles over the “Blue Eagle” and “Triple A” laws, as the National Industrial Recovery Act and Agricultural Adjustment Act were dubbed by the press. These “emergency” laws, which Congress enacted by huge margins during the “Hundred Days” session in 1933, handed the government over to business groups in both industry and agriculture. It would be hard to imagine any laws that more directly challenged the laissez-faire ideals of freedom of contract and free-market competition. It would be equally hard to imagine laws that more clearly rested on expansive notions of constitutional powers.
The National Industrial Recovery Act closely resembled Benito Mussolini’s “corporate state” regime in fascist Italy. Hugh Johnson, the former army general who ran the National Recovery Administration, made no secret of his administration for Mussolini, whose “shining name” he invoked in exhorting the NRA staff to emulate the Italian model. This does not mean that fascist “Black Shirts” took over the Blue Eagle program, but the parallels were close enough to alarm critics, who warned that giant “cartels” would swallow up their smaller competitors and turn government regulators into corporate clerks. The NIRA, in fact, suspended operation of the antitrust laws and delegated to business groups the power to frame “codes of fair competition” that allowed price-fixing and production controls.
The law’s drafters, drawn from the academic “Brains Trust” that Franklin Roosevelt recruited to translate his campaign slogans into law, gave the president final authority to approve, revise, or reject proposed codes. But the statute offered no precise standards for drafting more than a thousand codes that governed products from iron and steel to powder puffs. Charles Wyzanski, the young Brains Truster from Harvard Law School who put the finishing touches on the Recovery Act, confessed to his law-school mentor Felix Frankfurter that the code-making powers delegated by Congress to Roosevelt “go so far beyond the bounds of constitutionality that it would be useless” to expose the law to judicial scrutiny. But its chief backer, New York senator Robert Wagner, expressed confidence the Supreme Court would uphold the law. “It is true that legislative power cannot be delegated,” he admitted during Senate debate on the bill. “But in order that the wheels of government may continue to turn, the Court has always sanctioned the use of administrative agencies to fill gaps in those statutes
which set up reasonable guides to action.”
Chief Justice Hughes had allowed the Court to “fill in the details” of the Contract Clause in his Home Building opinion. Would he and Justice Roberts permit General Johnson and President Roosevelt to “fill gaps” in the Recovery Act ? Their votes in the Home Building and Nebbia cases encouraged the New Deal’s supporters when the long-anticipated “big” case reached the Court in May 1935, But there were dark clouds on the judicial horizon. Ruling four months earlier in January, the Court had struck down—over the solitary dissent of Justice Cardozo—one section of the Recovery Act that Congress had tacked on with hardly any debate. Known as the “hot-oil” law, this section dealt with gushing oil wells and falling prices by barring the interstate shipment of petroleum that was produced in excess of quotas set by states. Congress authorized President Roosevelt to police the hot-oil section; he delegated this power to his interior secretary, Harold Ickes, who in turn set up an agency to monitor oil shipments and enforce state production quotas.
Lawyers for the Panama Refining Company in Texas, a small producer in the biggest oil state, challenged the hot-oil law in federal court. A district judge who did not conceal his hostility to the New Deal issued an injunction against the law’s enforcement, but federal circuit judges reversed his decision and the company appealed to the Supreme Court. During arguments in Panama Refining v. Ryan, the company’s lawyers invoked the Constitution’s “separation of powers” and asserted that Congress had improperly delegated its responsibility for setting legislative standards to the executive branch. Writing for the Court, Chief Justice Hughes agreed. Congress had declared “no policy as to the transportation of excess production” of oil, he stated, and set “no criterion to govern the President’s course” in setting regulations. The hot-oil law ran into the judicial doctrine that bars the delegation of legislative powers to administrative officials and came up dry.
