A People's History of the Supreme Court

by Peter Irons

  The government’s loss in Panama Refining was clearly a setback, but the Court’s decision did not necessarily doom the rest of the Recovery Act. The hot-oil law basically required federal officials to rubber-stamp the production quotas set by states, with no power to examine or revise them. In contrast, Congress had declared the policy of “fair competition” in the Recovery Act and authorized the president to revise or reject any industry codes that he felt did not meet this standard. In truth, however, this was a slim reed on which to rest the entire New Deal recovery program. And the case that tested the strength of the “fair competition” reed, as Charles Wyzanski had feared, showed that it could not bear the weight of judicial scrutiny.

  The four Schechter brothers—Joseph, Martin, Aaron, and Alex—ran a wholesale business in Brooklyn that slaughtered and dressed kosher poultry for retail shops that catered to New York’s large Jewish population. Every day, trucks from the Schechter Poultry Company would cross the Brooklyn Bridge to the West Manhattan terminal of the New York Central Railroad; strong men would load dozens of “coops” that contained about one hundred chickens from train cars onto their trucks and return with their squawking cargo to the Schechters’ slaughterhouse. Retail dealers and butchers arrived before dawn and gave their orders to one of the brothers, who would pick chickens from coops and hand them to the shochtim, who worked under rabbinical supervsion. The shochtim would slit the chickens’ throats and drain the blood according to Jewish law. After plucking and dressing, the birds went to retail shops and wound up in ovens and soup pots across the city.

  New York’s kosher poultry business was a $90 million industry with some sixteen hundred workers, and the Schechter brothers operated one of the biggest wholesale outlets. They also cut corners to lure customers in this highly competitive business. Even before the National Recovery Administration set up an industry board to draft a live poultry code for the New York region, government lawyers called the brothers as reluctant witnesses in a case against the corrupt union that represented poultry workers. Their testimony exposed payoffs from favored customers who wanted the best chickens, sales of thousands of pounds of diseased birds, and widespread cheating of workers in their pay envelopes. Under the NRA code, the Schechters were required to follow the practice of “straight killing,” which prohibited any picking and choosing to get “better” birds from coops; they could only sell chickens that had been inspected for disease; and they had to pay their workers fifty cents an hour for a forty-hour week.

  But the Schechters could not resist temptation. “It didn’t take Joe Schechter and his brothers long to see the advantages of breaking the code,” wrote journalist Drew Pearson. “And it didn’t take enforcement officers long to catch them.” Government agents compiled a massive file on the Schechters, and in July 1934 all four brothers and their company were indicted on sixty criminal charges. One typical count alleged that “on or about June 24, 1934,” the Schechters “knowingly, wilfully and unlawfully sold for human consumption an unfit chicken to Harry Stauber.” It was this aspect that gave the case its lasting label, the “sick chicken” case. After a three-week trial, a jury convicted the Schechters on nineteen counts and Judge Marcus Campbell handed down jail terms of one to three months, with the oldest brother, Joe, getting the stiffest sentence. Federal circuit judges upheld the convictions on seventeen counts, but reversed two charges of violating the live poultry code’s wage-and-hour provisions, ruling that these labor regulations “cannot be said to affect interstate commerce.”

  The Schechters’ appeal reached the Supreme Court in May 1935. Solicitor General Stanley Reed argued for the government, and things went badly from his opening words. The case record showed that 96 percent of chickens sold in New York were shipped from other states, and Reed defended the Recovery Act as a permissible exercise of congressional power to regulate “commerce among the several states.” But his effort to portray an unbroken “flow of commerce” from chicken farms to consumers was snapped by a question from the Four Horsemen’s leader, Justice Sutherland: “Is everything that the defendants do which affects the poultry done after it is passed to them?” Reed conceded that the chickens “came to rest” in the Schechters’ shop before they were slaughtered and sold. Justice Stone, one of the liberals known as the Three Musketeers, posed another tough question; in approving NRA codes, he asked Reed, “what is the standard which the President has to follow?” Reed weakly replied that “there is no primary standard in the statute other than that of fair competition.”

  With those exchanges, the fate of the Recovery Act was sealed even before Reed sat down. But the Schechters’ lawyer, Joseph Heller, added a note of levity in his strong Brooklyn accent. Asked by Justice McReynolds to explain the “straight killing” requirement, Heller replied that “you have got to put your hand in the coop and take out whatever chicken comes to you.” Justice Sutherland broke in: “What if the chickens are all at one end?” Heller’s answer was lost in the gale of laughter that swept the courtroom.

  The justices restrained their chuckles in the Court’s sober opinion, which Chief Justice Hughes again took for himself to underscore its importance. Even Justice Cardozo, who dissented in the Panama Refining case, joined the unanimous ruling in Schechter Poultry Corp. v. United States. Hughes ruled that the Schechters were not engaged in interstate commerce and that Congress had no authority to regulate their business. He looked at the chickens and concluded that they came to roost in Brooklyn. “So far as the poultry here in question is concerned,” he wrote, “the flow in interstate commerce had ceased. The poultry had come to a permanent rest within the State.”

  Hughes turned to his own opinion in Panama Refining for precedent on the “delegation” issue raised by the Schechters’ lawyers. He found little in the congressional policy of “fair competition” to guide the president in judging the provisions of a thousand separate industrial codes. The business groups that drafted codes “may roam at will and the President may approve or disapprove their proposals as he may see fit,” Hughes wrote disapprovingly. He compared the “virtually unfettered” discretion given the president by the Recovery Act with the detailed “code of laws” in the Interstate Commerce Act, in which Congress established an “expert body” to make “findings of fact which in turn are sustained by evidence.” The “sweeping delegation” of power to the president in the Recovery Act imposed no restraints on his discretion. “We think that the code-making authority thus conferred is an unconstitutional delegation of legislative power,” Hughes concluded.

  The Court’s decision in the “sick chicken” case produced a major bout of presidential indigestion. Two days after the ruling, Roosevelt invited reporters to the Oval Office for an “off-the-record” chat. Waving a sheaf of telegrams urging that he ask Congress to “fix” the Recovery Act, he spoke of “what is happening as a result of the Supreme Court decision in every industry and in every community in the United States.” He read a telegram from the Cotton Textile Industry Committee, exhorting its members to continue voluntary adherence to the textile code. “What are we going to do,” Roosevelt asked, “if some mill starts lengthening out its hours and cutting its minimum wages?” He imagined a garment shop owner in New York telling his workers to stay at their machines until nine at night. “What are the girls going to do? Are they going to walk out at five o’clock and lose their jobs?” Roosevelt complained that the court had thrown the Recovery Act “straight in our faces and we have been relegated to the horse-and-buggy definition of interstate commerce.”

  The reporters in his office begged to put the “horse-and-buggy” quote in headlines, but Roosevelt deflected their pleas. Two days later, after several thousand more telegrams and letters flooded the White House, he called a formal press conference and spoke to two hundred reporters for ninety minutes. After reading more than twenty messages from the public and businessmen, he held up a copy of the Court’s opinion. “The implications of this decision,” h
e said gravely, “are much more important than almost certainly any decision of my lifetime or yours, more important than any decision probably since the Dred Scott case.” The reporters were delighted when Roosevelt repeated his “horse-and-buggy” quote, and they galloped to their typewriters. Although the president had deftly avoided any comment on plans to limit the Court’s powers or reform its structure, the press was not deterred from speculation. His speech, concluded Time magazine, “was obviously a trial balloon to see whether the U.S. would rally to a constitutional emendment giving the Federal Government centralized powers which it has never had.”

  Having launched his trial balloon, Roosevelt let it ride the currents of public opinion while he waited for the Court’s ruling on the Agricultural Adjustement Act, the second pillar of his New Deal recovery program. One reason the president deferred an showdown with the Court was that his political and legal advisers could not agree on the best response: some advocated a constitutional amendment requiring a “super-majority” of six or seven justices to invalidate a federal law, while others felt Congress should exercise its power under Article III of the Constitution to make “exceptions” to the Court’s jurisdiction and limit its power to decide cases based on “emergency” proclamations. Roosevelt decided to bide his time, and the lawyers who began drafting plans for any later assault on the Court were sworn to secrecy.

  More than seven months passed between the Schechter decision in May 1935 and the Court’s ruling on the “Triple A” program in January 1936. During this time, government lawyers struggled to frame a constitutional defense of a program that Congress had planted on rocky legal ground. The Agricultural Adjustment Act was designed to remedy a basic problem—farmers produced too much and received too little for their goods, from cattle to corn. The law’s drafters fashioned a two-pronged scheme to cut agricultural production and raise farm income. One section authorized the agriculture secretary, Henry A. Wallace, to set “voluntary” quotas for each farm product: farmers who grew crops like corn or cotton would cut back the acres they planted; those who raised animals like cows or chickens would limit their stock. The inducement for signing these “marketing agreements” would be payments to farmers from “processing taxes” collected from those who turned agricultural products into consumer goods, like meatpackers and textile manufacturers. These “taxes” would pass through the national treasury directly from processors to producers. In effect, the Triple A program would pay farmers not to farm and pass the cost to the public in higher prices.

  Despite many snags in working out quotas and policing the agreements, the program achieved its purpose of raising farm income. However, some processors—especially those who shipped goods abroad—complained that the “taxes” imposed on their products put them at a competitive disadvantage in foreign markets. The meatpacking industry in particular, which competed with countries like Argentina in selling canned meat in Europe, raised loud objections to the processing tax. On the surface, the case that tested the Triple A in the Supreme Court did not involve an industrial giant, but a bankrupt textile firm in Massachusetts. Federal officials had filed a claim against the receivers of the Hoosac Cotton Mills for the collection of $81,694.28 in overdue processing taxes. Prew Savoy, the government lawyer sent to discuss this debt with the company’s lawyers, discovered that Hoosac Mills was controlled by the board chairman of Armour & Company, a meatpacking giant, and that he had picked the bankrupt mill as a legal Trojan horse to shield his company from scrutiny. Savoy reported that Hoosac Mills’ lawyers were “convinced the tax was unconstitutional” and wanted “to make it a test case” of the entire Triple A program. After the government pressed its claim for overdue taxes, one of the Hoosac receivers, William A. Butler, filed suit in federal court to block their collection. The Triple A won the first judicial round, but lost in the court of appeals and asked the Supreme Court to decide the case.

  The lawyers who drafted the government’s brief in United States v. Butler faced two major obstacles. First, the powers granted Congress by Article I of the Constitution did not include regulation of agriculture. Second, the “taxes” collected from processors did not go into the national treasury’s general funds but were earmarked for payment directly to farmers. The only path the government’s lawyers could find around these roadblocks went through the unmapped land of the clause in Article I that gave Congress “power to lay and collect taxes” for the “general welfare of the United States.” The Supreme Court had never before construed the General Welfare Clause, but no other provision offered a smooth road to victory. “It is our position,” the Triple A lawyers boldly stated, that the court should construe the General Welfare Clause “to include anything conducive to the national welfare” and that “the question of what is for the general welfare” was solely for Congress to decide. They appealed to the Court not to “substitute its judgment for the judgment of the legislature” on the reach of this broad power.

  Pressed in his Schechter argument to point the Court to a congressional standard for industrial codes, Solicitor General Stanley Reed came up blank. Seven months later, he faced more questions in Butler about standards for computing processing taxes. Justice McReynolds began the grilling: “How is the tax fixed?” Reed answered that “the tax shall be equal to the difference between the farm value of the commodity and its purchasing power, or fair exchange value.” This vague answer did not satisfy McReynolds. “Farmers buy all sorts of articles, silk stockings, woolen coats, and so on,” he retorted. “With which are you going to compare it?” Reed finally conceded that the agriculture secretary was “at liberty” to set processing tax levels. He also backed away from the expansive reading of the General Welfare Clause in his brief. Reed asked the Court to construe the clause “not as a general power, but as a special power in Congress to expend this money” for a public purpose, that of reviving American agriculture. However, the Court had ruled in 1872 that states could not appropriate tax revenues to aid a private business, regardless of any “public purpose” it served. Try as he might, Reed could not push this precedential boulder from his path.

  The Court issued its Butler ruling on January 6, 1936. Chief Justice Hughes and Justice Roberts joined the Four Horsemen in chopping down the Triple A program like an overgrown weed. Roberts wrote for the Court and returned to his conservative roost. The processing tax was really “an exaction laid upon processors” with “an aim foreign to the procurement of revenue for the government,” he declared. The term “taxation,” he continued, “has never been thought to connote the expropriation of money from one group for the benefit of another.” Roberts conceded that the General Welfare Clause did not limit Congress in legislating beyond its “enumerated” powers, but he restricted its reach to “matters of national, as distinguished from local, welfare.” In his view, the welfare of each farmer was a local matter and that of agriculture as a whole not one national concern.

  This last statement prompted the Three Musketeers to unsheath their rhetorical swords in dissent. Speaking for Brandeis and Cardozo, Justice Stone excoriated Roberts’s opinion as a “tortured construction of the Constitution” that substituted “judicial fiat” for the judgment of Congress. “Courts are not the only agency of government that must be assumed to have capacity to govern,” Stone reminded the majority. Roberts had written that the Court’s only duty was “to lay the article of the Constitution which is invoked beside the statute which is challenged and to decide whether the latter squares with the former.” This mechanistic formula, relegating the judge to the role of a carpenter with a T-square, provoked Stone to reply that judges must recognize “that language, even of a constitution, may mean what it says: that the power to tax and spend includes the power to relieve a nation-wide economic maladjustment by conditional gifts of money” to those who are distressed.

  Mindful that every remark he made during an election year would be seen as political, President Roosevelt heeded the advice of his press
secretary, Steve Early, to resist pressure from reporters to comment on the Butler decision. “Please resist all—say nothing,” Early begged his boss. Roosevelt said nothing, but the lawyers he put to work on plans to “reform” the Supreme Court continued their labors behind closed doors.

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  “To Save the Constitution from the Court”

  The president’s resolve to avoid public criticism of the Court was sorely tested by two decisions handed down four months after Butler ended the Triple A pro- gram. On May 18, 1936, the Court struck down the Bituminous Coal Conservation Act, which Congress had designed to bring labor peace to the bloody coal industry, wracked for years by open warfare between union miners and guntoting company guards. Known as the Guffey Act after its chief sponsor, Senator Joseph Guffey of Pennsylvania, the law was passed in August 1935, after the Court ruled against the National Industrial Recovery Act in the Schechter case. But the Guffey Act included, word for word, the same labor provisions the justices had invalidated in the “sick chicken” case. Even Roosevelt, urging Congress to pass the law, expressed doubt “that the proposed act will withstand constitutional tests.”

  The same day Roosevelt signed the Guffey bill, three directors of the Carter Coal Company, one of the industry’s largest producers, met in Washington. James W. Carter, the company’s young president, was a bitter foe of the United Mine Workers and was determined to keep its members out of his mines. Two directors, Carter’s father and a company employee, voted at this meeting to sign a coal industry code that protected miners’ rights to join unions. The next morning, Frederick Wood, a prominent Wall Street lawyer, appeared in federal court in Washington and filed suit for James Carter against his own company, claiming that Carter’s father and employee had signed an unconstitutional code. Wood had recently argued the Schechter case in the Supreme Court along with Joseph Heller; he focused on the constitutional issues while Heller educated the justices about the kosher poultry business. Returning to the Court in the Carter case, Wood relied on Schechter in arguing that labor relations were local in nature and subject only to state regulation.