Why did the Supreme Court find Roosevelts National Industrial Recovery Act unconstitutional?

In A.L.A. Schechter Poultry Corp. v. United States, the Supreme Court declared unconstitutional a central piece of President Roosevelt's New Deal legislation. Above, a man feeds chickens in 1930s America.

Reproduction courtesy of the Library of Congress

Schechter v. U.S. (1935)

In the midst of the Great Depression, President Franklin Roosevelt worked with the Democratic Congress to enact several sweeping economic reform bills, known as the New Deal. In 1935, in A.L.A. Schechter Poultry Corp. v. United States, the Supreme Court declared unconstitutional a central piece of this New Deal legislation. In reviewing the conviction of a poultry company for breaking the Live Poultry Code, the Court held that the code violated the Constitution's separation of powers because it was written by agents of the president with no genuine congressional direction. The Court also held that much of the code exceeded the powers of Congress because the activities it policed were beyond what Congress could constitutionally regulate. The Live Poultry Code, written and promulgated by the Roosevelt administration in 1934, was a part of the National Industrial Recovery Act (NIRA), a law passed by Congress to regulate companies as a means to combat the Great Depression. Section 3 of NIRA gave the president authority to approve such "codes of unfair competition." Roosevelt's poultry code fixed the maximum number of hours a poultry employee could work, imposed a minimum wage for poultry employees, and banned certain methods of "unfair competition."

Schechter Poultry Corporation, the defendant in the case, purchased live poultry from commissioners in New York City and Philadelphia and sold slaughtered poultry to retailers and butchers in Brooklyn. Schechter was charged by the U.S. government with violating the poultry code by selling "unfit chickens," illegally selling chickens on an individual basis, avoiding inspections by local poultry regulators, falsifying records of poultry sold, and selling poultry to nonlicensed purchasers. Schechter was convicted in a federal district court, lost an appeal to the circuit court, and appealed to the Supreme Court, which reviewed the case in 1935.

The Supreme Court held that the Live Poultry Code was unconstitutional and that the conviction of Schechter must be overturned. First, the Court found that the president lacked the power to write the code, citing the U.S. Constitution, Article I, which states that all legislative power is to be vested in the Congress. Article I is thus violated if Congress grants its exclusive legislative power to the president. The NIRA allowed the president to write new codes, such as the poultry code, so long as they regulated "unfair competition." The Court found the phrase "unfair competition" too ambiguous to constitute an "intelligible principle" necessary to limit the president's actions in enforcing the NIRA. Lacking such a principle, the NIRA effectively allowed the president "unfettered discretion" to create "new laws" without congressional approval.

Second, the Court held that the poultry code violated the Constitution's Commerce Clause. The Constitution limits the activities over which Congress may legislate, reserving all other activities for the states to govern. While the Constitution allows Congress to regulate "interstate commerce" under the clause, the Court found Schechter's activities had nothing to do with interstate commerce. Schechter bought poultry from out of state, but its offending conduct was confined to New York State. The activities of Schechter thus fell outside congressional power because they constituted intrastate (in-state) commerce. Additionally, some provisions of the poultry code were found unconstitutional on their face. The effect of a butcher's hours and wage practices on interstate commerce, for example, was found far too "indirect" to be within the congressional powers to regulate under the Commerce Clause.

Schechter Poultry's sweeping interpretations of legislative power had devastating effects on President Roosevelt's New Deal programs in the 1930s. The centerpiece of the New Deal legislation, the NIRA, was essentially declared unconstitutional. Ultimately, President Roosevelt responded by proposing a "court packing" scheme in 1937, allowing a new Supreme Court justice to be appointed for every current sitting justice over the age of 70. The scheme was designed to help tip the Court's ideological balance to Roosevelt's side. It failed in Congress and never became law. By the late 1930s, however, the Supreme Court began reading Congress's powers under the Commerce Clause more broadly. Indeed, by the 1960s, the Court held that congressional statutes outlawing racial segregation in local businesses were constitutional under the Commerce Clause.

	AUTHOR'S BIO
	Alex McBride is a third year law student at Tulane Law School in New Orleans. He is articles editor on the TULANE LAW REVIEW and the 2005 recipient of the Ray Forrester Award in Constitutional Law. In 2007, Alex will be clerking with Judge Susan Braden on the United States Court of Federal Claims in Washington.

On June 13, 1933, the United States Congress passed the National Industrial Recovery Act (NIRA). The NIRA was part of President Franklin Delano Roosevelt's New Deal. Roosevelt hoped that his New Deal would allow Americans to cope with the Great Depression, would help end the current economic downturn, and would help prevent another depression from occurring in the future.

The NIRA had three components to it. First, the federal government, through the National Recovery Administration, would help businesses establish a means to regulate themselves and to guarantee fair trade. Roosevelt hoped that businesses, by engaging in fairer business practices that would encourage friendly rather than cut-throat competition, would help reduce unemployment and stimulate the economy. If a business agreed to follow the new code, the federal government would exempt it from antitrust laws. Second, the NIRA recognized laborers' right to unionize. A new National Labor Board, chaired by United States Senator Robert F. Wagner, would enforce this part of the statute. Finally, the NIRA created the Public Works Administration. Under this part of the act, the federal government was to provide 3.3 billion dollars to hire Americans to work on public works projects. These projects ranged from sidewalks and school buildings to dams.

In 1935, the United States Supreme Court declared the NIRA unconstitutional. According to the court, the federal government, especially the president, had assumed powers that the United States Constitution did not grant. In particular, the first part of the NIRA allowed the federal government to regulate businesses that did not engage in interstate commerce.

While the Supreme Court ruled against Roosevelt and the NIRA, the act caused tremendous change within the United States, including Ohio, during its brief existence. Workers across the United States descended upon the American Federation of Labor's (AFL) offices, seeking to join this union. Unfortunately for the workers, most of these people were unskilled, and the AFL only accepted skilled workers. As a result of the AFL's unwillingness to accept unskilled workers, these employees formed their own unions to seek better working conditions and wages. The NIRA resulted in a division among AFL members, as some members began to call for a more inclusive union, one that would fight for the rights of unskilled workers, rather than just workers skilled in a particular craft. Tensions over this issue became so prevalent that in 1935, John L. Lewis, an AFL member, formed the Committee for Industrial Organization. Originally this organization was a part of the AFL, but in 1937, the parent organization expelled all members of the Committee for Industrial Organization. The Committee for Industrial Organization eventually became the Congress of Industrial Organizations (CIO). The AFL and the CIO remained as two separate organizations until 1955, when the two unions reunited as the AFL-CIO.

While the United States Supreme Court struck down the National Industrial Recovery Act on constitutional grounds in 1935, that same year, the United States Congress implemented the Wagner-Connery Act. This legislation legalized unions once again and created the National Labor Relations Board, which was to supervise laborers' negotiations with their employers, to guarantee collective bargaining, and to prevent employers from engaging in unfair labor practices.

See Also

By the end of this section, you will:

• Explain how the Great Depression and the New Deal impacted American political, social, and economic life over time

In 1933, during the “First Hundred Days” of Franklin Roosevelt’s administration, the newly elected president and Democratic majorities in Congress passed a wave of New Deal legislation for relief and recovery from the depths of the Great Depression. Drawing on the examples of the Progressive Era, World War I, and the 1920s, they sought government-business cooperation to rationalize and plan the economy and avert what they considered ruinous competition. This led to a rapid expansion of the federal regulatory state, with emergency powers to combat the Depression in the public interest.

In May, Roosevelt delivered a “fireside chat” in which he reached out directly to the American people over the radio to assuage their fears and explain his policies, including an upcoming business-government collaboration he described as “a partnership in planning.” In June, Congress opened the way for this collaboration by passing the National Industrial Recovery Act (NIRA)as part of the Hundred Days wave of New Deal legislation that spring. The law suspended antitrust laws and allowed industries to draw up a multitude of “codes of fair competition” as part of an attempt at industrial self-regulation. Businesses could once again collude to artificially lower production and raise prices for their goods, restoring profits so they could expand and hire workers again. The NIRA also protected workers’ right to organize labor unions and to bargain collectively, while setting minimum wages and maximum hours. Finally, the law allocated $3.3 billion for public works to be undertaken by the Public Works Administration (PWA).

President Franklin Roosevelt, pictured in 1934, gave “fireside chats” throughout his presidency, so named because they were broadcast on the radio and people could listen to them by their fireplace at home.

The National Recovery Administration (NRA) was formed to administer the NIRA and headed by West Point graduate and U.S. general Hugh Johnson, who had gained experience with government-business cooperation in the War Industries Board during World War I. Johnson touted the NIRA as a voluntary rather than a compulsory industrial program, to make it more palatable to business leaders who were skeptical of government regulation. Inspired by World War I propaganda efforts, he launched a public relations campaign, organized popular events such as a parade of 250,000 marchers in New York City, and urged consumers to patronize only stores that proudly displayed the NRA “Blue Eagle” with the inscription, “We Do Our Part.”

The NIRA was supposed to encourage democratic self-regulation by business, but instead it used the coercive power of the federal government. Johnson scorned “slackers” and “chiselers” who would not cooperate with NRA codes and warned, “May God have mercy on the man or group of men who attempt to trifle with this bird.” Roosevelt and Johnson withdrew government contracts from recalcitrant businesses, and the federal government could even jail or fine violators of the NRA codes. Johnson compared code violators to the biblical character of Judas Iscariot for betraying the public good.

The program was initially popular with desperate business owners who had seen their profits plunge in the Depression and with union leaders who appreciated federal protection of organized labor’s rights. Not all were pleased, however. Journalist William Randolph Hearst said the program was an example of state socialism and quipped that NRA stood for “No Recovery Allowed.” Another critical journalist, Walter Lippmann, asserted, “The excessive centralization and the dictatorial spirit are producing a revulsion of feeling against bureaucratic control of American economic life.” Some business owners began to agree with those sentiments.

Although many industries supported the National Recovery Administration (NRA), including the film industry as pictured here, many business owners were skeptical of the administration’s efforts to plan the economy.

Joseph, Martin, Alex, and Aaron Schechter were brothers and observant Jews who owned the A. L. A. Schechter Poultry Corporation. They ran two small kosher butcher shops in Brooklyn, New York, that practiced the Jewish dietary laws of kashrut. Kashrut requires that animals be treated humanely and imposes high standards of sanitation and health. Customers could also inspect the animals and reject any that seemed unfit to purchase. These standards attracted buyers who knew the Schechter brothers followed ethical standards while providing high-quality meat. Under regulations established by the NRA, however, customers could not inspect chickens before buying them. The law forced the brothers to abandon their kashrut practices, putting their business in jeopardy.

The Schechter brothers thought the NRA codes were oppressive and soon refused to abide by them. In 1934, they were arrested, jailed, and convicted, sentenced to three months in jail and payment of a $500 fine. An appellate court upheld their conviction, and the case went to the Supreme Court.

When the case was argued before the Supreme Court in early May 1935, defense lawyer Joseph Heller explained the new law to the astonished justices: “The customer is not permitted to select the ones [chickens] that he wants. He must put his hand in the coop when he buys from the slaughterhouse and take the first chicken that comes to hand.” Laughter erupted when Justice George Sutherland queried, “Well, suppose, however, that all the chickens have gone over to one end of the coop?”

The defense and the government’s attorneys offered differing views on the nature of the government’s role in the economy. Heller argued that the law was “destructive of our dual system of government and subversive of our political, social, and economic institutions under the Constitution.” Acting head of the NRA and attorney Donald Richberg countered that the NRA “was enacted for the purpose of checking the progressive destruction of industry, to make possible an orderly advance by industry.”

On May 27, 1935, the Supreme Court rendered a unanimous decision in favor of the defendants in Schechter v. United States. Chief Justice Charles Evans Hughes wrote the opinion for the Court and asserted that despite the crisis of the Great Depression, “Extraordinary conditions do not create or enlarge constitutional power.” All the justices agreed the NIRA was unconstitutional because it regulated intrastate commerce (within New York in this case) rather than interstate commerce, as was permitted in the Commerce Clause of Article I of the Constitution. The law had allowed the government to exercise unlimited authority and sanctioned a “completely centralized government.” Moreover, the Court thought the legislative branch had unconstitutionally delegated its authority to regulate interstate commerce to the executive branch and so had violated the principle of separation of powers. Justice Benjamin Cardozo wrote a concurring opinion, stating, “This is delegation running riot.”

Charles Evans Hughes, the Chief Justice of the Supreme Court during the Schechter case, explained that the government was overstepping its power through the National Industrial Recovery Act (NIRA).

Justice Louis Brandeis was normally a reliable liberal on the Court who often sided with Roosevelt and supported government regulation, but privately he told some of Roosevelt’s aides to “go back and tell the President that we’re not going to let this government centralize everything. It’s come to an end.” The Roosevelt administration was irate about the decision because it overturned what the president and his advisers believed was the main vehicle for achieving economic recovery and reforming the inherent problems of capitalism. Secretary of the Interior and head of the PWA Harold Ickes complained, “We have to meet this issue or abandon any effort to better the social and economic conditions of the people.”

At a press conference a few days later, Roosevelt severely criticized the Court’s decision. He asserted the federal government had taken on expansive emergency powers during World War I and that the crisis of the Great Depression demanded it do so now. A believer in an evolving, “living” Constitution, he was frustrated that the Court read the Commerce Clause “in the horse-and-buggy age when the clause was written,” rather than “in the light of present-day civilization.”

Roosevelt was dissatisfied because he thought only the federal government had the power needed to solve the unprecedented economic crisis of the Depression. He believed restoring the foundations of a sound national economy depended on “a sound and rational ordering of its various elements.” The Court had shattered administration efforts to build a cooperative economy in which business and government worked together toward a planned economy that was prosperous for all and put the public good before private interests. The president complained at a cabinet meeting that “all the New Deal bills will be declared unconstitutional by the Supreme Court. This will mean that everything that this Administration has done of any moment will be nullified.”

Although many Americans who were unemployed or owned failing business may have been sympathetic to Roosevelt’s point of view, the NRA had grown extremely unpopular among almost all interest groups for various reasons. Big business quickly grew to resent regulatory control by the government. Small business was angry that the codes favored large businesses and created cartels. Individual workers and unions were disappointed the agency did not protect union gains or increase wages as much as expected. Consumers were irate that prices rose at a time when they had no jobs and very little money. Finally, the NRA did not produce the recovery or curb unemployment enough to lessen the economic woes of millions of Americans. The American public did not generally mourn the agency’s passing.

In 1936, the Supreme Court declared the Agricultural Adjustment Act unconstitutional for similar reasons. The Act had paid farmers not to plant crops in order to prevent overproduction and thus to artificially increase prices. Roosevelt responded early the next year by proposing a “Court-packing plan,” in which he would have the authority to appoint up to six additional justices to the Supreme Court to push his legislative agenda through the Court. Most Americans reacted unfavorably and thought Roosevelt was tampering with the Constitution for political reasons.

The NIRA had not produced the expected economic recovery during the Great Depression, and neither did the New Deal, more broadly. In the mid-1930s, federal spending had produced modest increases in economic indicators but also propped up the economy artificially. When Roosevelt and Congress cut that spending in 1937, the economy collapsed into deep recession again. World War II restarted, American factories and led to full employment, and, finally, the postwar American economy boomed.

Review Questions

1. A key result of New Deal legislation was to create a federal government

1. unresponsive to the problems created by the Great Depression
2. that nationalized important industries within the United States economy
3. that used emergency powers to expand the federal regulatory state
4. determined to continue the economic policies of the 1920s

2. The National Industrial Recovery Act’s provisions included all the following except

1. codes of fair competition for businesses to follow
2. protection for collective bargaining
3. creation of a public works program
4. federal government takeover of vital national industries

3. Government efforts to mobilize the economy during World War I influenced the development of programs to combat the Great Depression because

1. military leaders headed New Deal agencies
2. business-government cooperative efforts had proved successful before
3. public relations campaigns had little effect
4. the Supreme Court ruled any federal regulation of the economy to be unconstitutional

4. Conservatives claimed the National Industrial Recovery Act was

1. military leaders headed New Deal agencies
2. business-government cooperative efforts had proved successful before
3. public relations campaigns had little effect
4. the Supreme Court ruled any federal regulation of the economy to be unconstitutional

5. The Supreme Court’s 1935 decision in the Schechter case found the National Industrial Recovery Act had unconstitutionally limited

1. military leaders headed New Deal agencies
2. business-government cooperative efforts had proved successful before
3. public relations campaigns had little effect
4. the Supreme Court ruled any federal regulation of the economy to be unconstitutional

6. The Supreme Court’s rulings on the National Industrial Recovery Act (1935) and the Agricultural Adjustment Act (1936) led to

1. an electoral defeat for Franklin Roosevelt in 1936
2. a plan to reorganize the federal courts to be more sympathetic to the New Deal
3. impeachment proceedings against the chief justice of the Supreme Court
4. passage of an unprecedented number of New Deal laws by Congress

Free Response Questions

1. Explain how the Roosevelt administration expected the National Industrial Recovery Act (NIRA) to correct some of the flaws of capitalism.
2. Explain how New Deal policies led to an increase in union membership.
3. Analyze the reasons the National Industrial Recovery Act was ruled unconstitutional.

AP Practice Questions

“That brings me to the final step-bringing back industry along sound lines.

Last Autumn, on several occasions, I expressed my faith that we can make possible by democratic self-discipline in industry general increases in wages and shortening of hours sufficient to enable industry to pay its own workers enough to let those workers buy and use the things that their labor produces. This can be done only if we permit and encourage cooperative action in industry because it is obvious that without united action a few selfish men in each competitive group will pay starvation wages and insist on long hours of work. Others in that group must either follow suit or close up shop. . . .

There is a clear way to reverse that process: If all employers in each competitive group agree to pay their workers the same wages – reasonable wages – and require the same hours – reasonable hours – then higher wages and shorter hours will hurt no employer. Moreover, such action is better for the employer than unemployment and low wages, because it makes more buyers for his product. That is the simple idea which is the very heart of the Industrial Recovery Act.”

Franklin D. Roosevelt, Fireside Chat 3, July 24, 1933

Refer to the excerpt provided.

1. A historian might use this speech to support the claim that the New Deal

1. was primarily influenced by socialist philosophy
2. rejected capitalism
3. created a limited welfare state
4. ended the Great Depression

2. What was a direct result of the trend demonstrated in the excerpt?

1. Collapse of the market revolution
2. Resurgence of Social Darwinism
3. The rise of industrial capitalism
4. A redefinition of government involvement in the economy

3. The ideas in this excerpt most directly resulted from what earlier movement?

1. American System
2. Populist Movement
3. Progressive Era
4. Social Gospel

Primary Sources

A. L. A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935) //supreme.justia.com/cases/federal/us/295/495/#tab-opinion-1934743

“Executive Order 7252 Terminating the National Recovery Administration.” December 21, 1935. //www.presidency.ucsb.edu/documents/executive-order-7252-terminating-the-national-recovery-administration

“National Industrial Recovery Act.” 1933. //www.ourdocuments.gov/doc.php?flash=false&doc=66

Suggested Resources

Bellush, Bernard. The Failure of the NRA. New York: W. W. Norton & Co., 1976.

Brands, H. W. Traitor to His Class: The Privileged Life and Radical Presidency of Franklin Delano Roosevelt. New York: Doubleday, 2008.

Cohen, Adam. Nothing to Fear: FDR’s Inner Circle and the Hundred Days That Created Modern America. New York: Penguin, 2009.

Dallek, Robert. Franklin D. Roosevelt: A Political Life. New York: Viking, 2017.

Kennedy, David M. Freedom from Fear: The American People in Depression and War, 1929-1945. Oxford: Oxford University Press, 1999.

Shlaes, Amity. The Forgotten Man: A New History of the Great Depression. New York: Harper, 2007.