National Power

by
 Samuel S. Wilson¹

The long series of national power cases from the Sixth Circuit begins with one John L. Harper driving a horse and wagon from Chillicothe to Columbus in September of 1819. The wagon contained some $100,000 in cash which Harper had taken from the National Bank in Chillicothe. Harper was neither a bank robber nor a dissatisfied depositor; he was the duly authorized agent of Ralph Osborn, the Ohio State Auditor, sent to collect the Ohio tax on each national branch bank in Ohio. This tax resulted from the political furor over the national bank. The bank had originally been chartered in 1791. It was rechartered in 1816, but soon thereafter economic hard times created a crisis. The national bank's efforts to control easy credit made it highly unpopular.²

The constitutional issue was the power of Congress to create a national bank. The Supreme Court decided that Congress had this power on March 6, 1819, more than five months before Mr. Harper visited the national bank in Chillicothe.³

But so strong were the feelings on the national bank issue that Ohio decided to try to collect the tax⁴ anyway. The legislation, enacted in February, 1819, was unusual. It required the collecting agent, after demand for payment was refused to enter the bank vault and levy on whatever he found.⁵ Mr. Harper did exactly that.

On the previous day the Bank had sought a writ from the United States Circuit Court of Ohio enjoining Osborn and Harper from collecting the tax. The Bank was successful but its attorneys, apparently preoccupied with celebrating their victory, failed to serve the writ upon Harper until he was on his way back to Columbus with the money. He disregarded the writ, proceeded to Columbus, and turned the money over to Osborn. It remained with the Auditor until the litigation was concluded.

When the case came to trial on the merits, lead counsel were Henry Clay for the Bank and Charles Hammond for the Auditor. Among additional counsel who argued before the Supreme Court was Daniel Webster for the Bank. In the trial court, one account indicates, Mr. Clay had some difficulty in selecting the cause of action which would allow him to put in his evidence. "Mr. Clay took snuff with both hands, seemed quite bewildered, and at the mercy of his opponent." Mr. Hammond, however, acceded to an amendment to the pleadings so that the basic issues could be raised.⁶

These were threefold. First, whether McCulloch v. Maryland should be reversed; second, whether the action was one against a state in violation of the Eleventh Amendment; and third, whether Congress had given the federal courts jurisdiction by the statute authorizing the national bank to sue or be sued in the federal courts. The Circuit Court held for the Bank on all three. It issued a decree ordering the Auditor to return the money to the Bank. Its opinion was not reported.

The Supreme Court affirmed. In an opinion by Marshall, it adhered rather summarily to McCulloch on the first issue. Because the opinion essentially repeats McCulloch on this point, its principal significance lies in the other two issues. On the Eleventh Amendment question, the Court held that it did not bar an action against a state official. It only applied when the state itself was a party. That rule is still the law.⁷

The jurisdictional issue had two parts: an interpretation of the bank statute and then a determination that, as interpreted, it came within Article III of the Constitution.⁸ The first question was whether the statute empowering the bank to sue and be sued in federal court created an independent basis of jurisdiction or did it merely empower the bank to litigate where another basis for jurisdiction existed. Marshall concluded that an independent basis was created. His discussion was brief. "These words," he said, "seem to the Court to admit of but one interpretation. They cannot be made plainer by explanation."⁹

The second question was whether such a jurisdictional statute came within the "arising under" provision of Article III. The State Auditor argued that this phrase was limited to causes of action arising under federal law. The statute at issue did not involve substantive rights and thus could not constitutionally create federal jurisdiction. Marshall rejected this argument. The bank's power to sue was a necessary legal ingredient, he said to every action which it brought.¹⁰ The federal courts would have jurisdiction, he concluded, even where the cause of action was based on state contract law.¹¹ This point took on extra importance when the general federal question statute was enacted in 1875 using the constitutional phrase "arising under" to define its jurisdiction. The courts originally followed the Osborn v. Bank of the United States approach¹² but later required a substantial claim founded directly on federal law.¹³

More than half a century after Osborn another Sixth Circuit case again affirmed national power, this time in the anti-trust area. The case was Addyston Pipes Steel Co. v. United States.¹⁴ When finally decided by the Supreme Court in 1899, the Addyston case went far to revive the Sherman Act after the narrowing effect of the Sugar Trust Case.¹⁵

The Sugar Trust case was the first important Government action to enforce the Sherman Act. The defendant was a sugar manufacturer who allegedly violated the Act by acquiring the stock of its principal competitors. The Supreme Court found that these acquisitions merely related to manufacturing and that manufacturing was beyond the reach of the Commerce Clause.¹⁶

Despite this result, Judson Harmon, an Ohioan who became United States Attorney General in 1895, decided to continue efforts to enforce the Act.¹⁷ Accordingly, he wrote to U.S. Attorneys throughout the country to encourage Sherman Act suits. One such was James Bible of Tennessee. In November, 1896, Bible wrote Harmon about a combination controlling the cast iron pipe industry in the Southeast. Shortly thereafter, with Harmon's encouragement, Bible began the Addyston case.

The defendants were six manufacturers of cast iron pipes. They controlled most of the pipe production in their area. Their principal customers were cities which used the pipe for their water systems. The manufacturers formed an association which allocated major customers, fixed prices to be bid, and redistributed profits (so that each share in the profit of orders filled by the others). There wasn't much question about the facts. Defendants principal contention was that under the Sugar Trust case, the Sherman Act could not be constitutionally applied.

In Circuit Court, United States District Judge Charles D. Clark dismissed the complaint largely on the authority of the Sugar Trust case.¹⁸ This defeat for the government coincided in time with a change in national administrations. The Circuit Court decision was announced on February 5, 1897. On March 4, 1897, William McKinley, a Republican, succeeded Grover Cleveland, a Democrat, as President. There was some hesitation but the new administration decided to proceed with the case. Although he was replaced as U. S. Attorney in the political turnover, Bible argued the case in the Circuit Court of Appeals.¹⁹

The Circuit Court of Appeals reversed.²⁰ In an opinion by then Circuit Judge William Howard Taft,²¹ the Court said:

The error into which the circuit court fell, it seems to us, was in not observing the difference between the regulating power of congress over contracts and negotiations for sales of goods to be delivered across state lines, and that over the merchandise, the subject of such sales and negotiations. The goods are not within the control of congress until they are in actual transit from one state to another. But the negotiations and making of sales which necessarily involve in their execution the delivery of merchandise across state lines are interstate commerce, and so within the regulating power of congress even before the transit of the goods in performance of the contract has begun.²²

Taft distinguished the Sugar Trust case in that there was no proof in the earlier case of an intent to restrain commerce. In Addyston, he said such restraint was the necessary result of the association agreements. The Supreme Court affirmed the Court of Appeals. Its opinion by Justice Rufus Peckham largely followed the rationale of Judge Taft.

The Addyston case paved the way for the "trust busting" policies pursued by Presidents Theodore Roosevelt and Taft, the latter, of course, being the judge who wrote the opinion in Addyston in the Circuit Court of Appeals.²³

In later decades the focus in national regulation of the economy shifted to the administrative agency. This trend was accelerated by the Great Depression and the New Deal. That led to the next great constitutional collision over national power and the economy. Once again Sixth Circuit cases played a leading part.

The crisis began with a Second Circuit case in which the Supreme Court refused to extend its definition of commerce among the several states to a poultry slaughterhouse in Brooklyn even though some of the poultry came from out of state.²⁴ This decision knocked out the National Industrial Recovery Act.

The last of this line of cases²⁵ was Carter v. Carter Coal Co.²⁶ The Supreme Court decision involved three cases. One was Carter from the District of Columbia Circuit. The other two were from the Sixth Circuit.

At issue was the constitutionality of the Bituminous Coal Conservation Act of 1935, which sought to regulate prices, wages, hours, and working conditions in the bituminous coal industry. The Act imposed a 15 percent excise tax on all bituminous coal mined but 13-1/2 percent of the tax would not be imposed on mining companies which complied with the terms of the Act.

The Sixth Circuit actions were brought in the Western District of Kentucky. In one case, nineteen mining companies sought an injunction to prevent the Acting Collector of Internal Revenue for the District of Kentucky from collecting the tax imposed by the Act.²⁷ The other was an action by a shareholder against one of the plaintiffs in the first action and its officers to require compliance with the Act.²⁸

On November 14, 1935, District Judge Elwood Hamilton upheld the Act. Prophetically, he observed:

Commerce is a moving stream, rising, falling, and changing its course with the progress of civilization, and what affects it in one generation may not in another.²⁹

The cases were appealed to the Circuit Court of Appeals, but on December 23, 1935, before the matter could be heard, the Supreme Court granted a writ of certiorari.³⁰ The cases were consolidated with the Carter case. They were argued on March 11 and 12, 1936. On May 18, the Supreme Court reversed Judge Hamilton and struck down the Act.³¹ Coal mining was production, wrote Justice George Sutherland for the Court, and not commerce. He explained:

Extraction of coal from the mine is the aim and completed result of local activities. Commerce in the coal mined is not brought into being by force of these activities, but by negotiations, agreements, and circumstances entirely apart from production. Mining brings the subject matter of commerce into being. Commerce disposes of it.³²

Coming in the spring of a presidential election year, the political impact of the decision was heavy. A biographer of Justice Sutherland described it:

Unlike the Schechter decision, the Carter case involved an industry vital to the very existence of interstate commerce and this was known long before John L. Lewis rendered it observable to even the dullest intelligence. It therefore presented the country with the most decisive possible denial that the Constitution contained within its grants any authority for meeting the most serious of problems facing the nation in 1936. The opinion, both in the expressions it employed and in the result it achieved, struck the idea of American nationalism a blow such as it has seldom, if ever, received.³³

The 1936 election, of course, produced an overwhelming victory for President Franklin D. Roosevelt. He construed this victory as a mandate supporting his policy of national economic regulation. On February 5, 1937, he announced his plan to add to the Supreme Court additional justices who presumably would be more sympathetic to his policy.

Ultimately his so-called "court-packing" proposal proved a political boomerang. But, meanwhile, on Capitol Hill, the existing Supreme Court justices were becoming more sympathetic -- or at least Chief Justice Charles Evans Hughes and Justice Owen J. Roberts became so. On April 12, 1937, their votes produced a decision upholding the National Labor Relations Act.³⁴ The Chief Justice declared for the Court that it was "apparent that the fact that the employees concerned were engaged in production is not determinative."

On the same day that the Jones & Laughlin³⁵ decision was announced, the Supreme Court also ruled on a Sixth Circuit case upholding the constitutionality of the National Labor Relations Act.³⁶ The case involved application of the act to a producer of truck trailers. Relying on Carter, the Sixth Circuit had held the Act unconstitutional.³⁷ The Supreme Court, however, relied on Jones & Laughlin, and reversed. A month later in another case the Sixth Circuit again had to pass on the constitutionality of the Act. After noting its prior displaced reliance on Carter, the brief per curiam opinion commented wryly: "We again follow the latest decision of the Supreme Court and hold that the decree herein (enjoining enforcement of the Act) should be vacated."³⁸

Jones & Laughlin began a new line of cases³⁹ expanding the federal power to regulate the economy. This new line culminated in Wickard v. Filburn, another Sixth Circuit case. This case involved the constitutionality of wheat crop controls pursuant to the Agricultural Adjustment Act. Until 1940 the Act had not covered wheat which was consumed on the farm where it was grown. This wheat amounted to a substantial part of the total amount grown. In 1940 wheat crops were large and prices fell.⁴⁰ Congress responded by expanding the controls of the Act of 1941 to cover all wheat crops grown, even that consumed by the grower.⁴¹

Promptly Roscoe C. Filburn, who operated a small farm in Montgomery County, Ohio, brought an action in the Southern District of Ohio against Claude R. Wickard, the Secretary of Agriculture. This venue was defective since the Secretary could not at that time be served outside the District of Columbia. He waived this objection. However, in several other cases, he did object successfully to venue.⁴² Evidently he selected Filburn's case in which to test the constitutionality of the controls.

In his Supreme Court opinion, Justice Robert H. Jackson described Mr. Filburn's operation as follows:

The appellee for many years past has owned and operated a small farm in Montgomery County, Ohio, maintaining a herd of dairy cattle, selling milk, raising poultry, and selling poultry and eggs. It has been his practice to raise a small acreage of winter wheat sown in the fall and harvested in the following July; to sell a portion of the crop; to feed to poultry and livestock on the farm, some of which is sold; to use some for making flour for home consumption; and to keep the rest for the following seeding.⁴³

In July, 1940, Filburn's 1941 quota was established at 11.1 acres with a normal yield of 20.1 bushels per acre. Instead, Mr. Filburn planted 23 acres. From the excess average he harvested 230 bushels. Under the Act he was subject to a penalty of 49 cents per bushel for a total of $112.70.

The case was heard by a three-judge panel composed of Circuit Judge Florence E. Allen and District Judges John H. Druffel and Robert R. Nevin. On March 14, 1942, the Court decided for Filburn. Judge Allen dissented. In an opinion for himself and Judge Nevin, Judge Druffel focused on the fact that the amount of the penalty was related to 1941 wheat prices and thus not fixed until after Filburn had planted his crop.⁴⁴ This feature made the penalty violate due process, Judge Druffel concluded. In her dissent, Judge Allen found that the retroactive fixing of the amount of the penalty did not violate due process. After all, she pointed out, any penalty could be avoided by complying with the acreage allotment. On the Commerce Clause issue, she upheld the Act. Purely intrastate activities could be regulated if they interfered with or injured interstate commerce, she said.

The Supreme Court generally followed Judge Allen's dissent. In the key passage of his opinion for the Court upholding the Act, Justice Jackson wrote:

It is well established by decision of this court that the power to regulate commerce includes the power to regulate the prices at which commodities in that commerce are dealt in and practices affecting such prices . . . It can hardly be denied that a factor of such volume as home-consumed wheat would have a substantial influence on price and market conditions.⁴⁵

Wickard attracted relatively little contemporary attention because of World War II, but the case has remained a landmark in two ways. First, it was the last of the major cases on New Deal economic regulation. And second, it marked a "crest"⁴⁶ in the constitutional reach of the federal commerce power. It was relied on by the Supreme Court in both the leading cases upholding the Civil Rights Act of 1964 as a valid exercise of the Commerce Power.⁴⁷