The Commerce Clause

The significance of the Commerce Clause  in the Constitution cannot be overstated.  It is fair to say the  Constitution itself owes its existence to regulating commerce.  The  Articles of Confederation, the immediate predecessor to the U.S.  Constitution, was the official governing document of the U.S. from March  1781, until it was replaced by the Constitution in 1789.  A noble but  flawed attempt to unify the states, it required 9 of 13 states to  accomplish anything and unanimity for amendments.  The only option the  national government had to raise revenue was to pass a tri-cornered hat  around to the states and ask them to throw in a couple of bucks…  something the states rarely did.   Perhaps one of the greatest flaws of  the Articles was its inability to resolve conflicts among the states,  particularly in the area of commerce.
 

The Annapolis Convention, as it has been christened by history, was a  meeting of twelve "commissioners" from five states called by the  Virginia Assembly to "take into consideration the trade and Commerce of  the United States" and to propose a "uniform system in their commercial  regulations."
 

With only five states in attendance, the Commissioners mandated that a  "future convention" be convened for the purpose of addressing "other  objects, than those of commerce."  Clearly, it was not simply the poor  attendance that encouraged convening a subsequent convention.  As the  Report of the Annapolis Convention concluded: "the defects [with the  Confederation], upon a closer examination, may be found greater and more  numerous, than even these acts imply."  Hence the Convention adjourned,  calling for a future meeting of a "Convention of Delegates from the  United States, for the special and sole purpose of entering into this  investigation, and digesting a plan for supplying such defects as may be  discovered to exist."  The meeting was to take place "at Philadelphia  on the second Monday in May next." That meeting became the Philadelphia  Convention, the most significant gathering in constitutional history.   And, it all began for the purpose of regulating commerce.  Visit the  Annapolis Convention in Predecessors Park for more.
 
From Proceedings of Commissioners to  Remedy Defects of the Federal Government: 1786 Note for September 14,  1786. The Avalone Project  http://avalon.law.yale.edu/18th_century/annapoli.asp
 

Also see Clinton Rossiter, 1787  The Grand Convention (1966) pp 48-57 and Richard Beeman, Plain, Honest  Men: The Making of the American Constitution (2009) pp. 18-21.

 While  the delegates to the Philadelphia Convention disagreed on a number of  issues, they seemed uniform in their belief that the government must  have the power to regulate commerce.  According to Madison’s Notes from  the Convention, Roger Sherman, speaking on June 6, 1787, identified as  one of the “few objects of the union…regulating foreign commerce.”  On  June 15, also according to Madison’s Notes, William Patterson presented  what became known as the New Jersey Plan which proposed merely to amend  the Articles of Confederation.  One of the amendments would give the  Congress the power: “to pass Acts for the regulation of trade &  commerce as well with foreign nations as with each other.”
 

The debate on regulating commerce dealt with the new federal  government’s ability to tax, limit or ban the importation of slaves—a  topic raised on August 22 and tabled in hopes of finding a middle  ground.  Various delegates made it clear the way these issues were  resolved could kill the entire convention.  Ultimately, the compromise  that was acceptable to all allowed a ban on importation of slaves to  take effect in 1808 (thus guaranteeing importation until that year).  An  additional debate took place on the 22nd of August and again on the  29th over a proposal requiring a two-thirds vote in the House and Senate  for the purpose of passing navigation acts. The proposal did not pass.
 

From  Notes on Debates in the Federal Convention of 1787 Reported by James  Madison. The Avalone Project. June 6, 1787  (http://avalon.law.yale.edu/18th_century/debates_606.asp). June 15,1 787  (http://avalon.law.yale.edu/18th_century/debates_615.asp). August 22,  1787 (http://avalon.law.yale.edu/18th_century/debates_822.asp).  August  29, 1787 (http://avalon.law.yale.edu/18th_century/debates_822.asp).
 

Commerce was debated on September 4,  1787, as reported by Dr. James McHenry, a delegate from Maryland (and  the namesake for Fort McHenry…of Star Spangled Banner fame…in Baltimore  Harbor). McHenry’s Notes reveal on that date, while the delegates were  reviewing the draft of the Constitution, he noted “the national  legislature” was not given the power to “erect light houses or clean out  or preserve the navigation of harbors.”  The proposal was that the  expense of these items should “be borne by commerce.”  Later on  September 6, the convention discussed “enabling the legislature to erect  piers for protection of shipping in winter and to preserve the  navigation of harbours.”  Gouverneur Morris expressed his belief that  the power was implied. Eventually, those powers were exercised by  Congress under the Commerce Clause (see below).    
 

McHenry’s Notes, in the following quote,  also allude to a power eventually called the Dormant Commerce Clause  which prevents the states from regulating interstate commerce, since  that power is one possessed by the federal government:
 

“Is it proper to declare all the  navigable waters or rivers and within the U. S. common high ways?  Perhaps a power to restrain any State from demanding tribute from  citizens of another State in such cases is comprehended in the power to  regulate trade between State and State.”
 

No action was taken in the convention on any of these proposals.
 

From  Papers of Dr. James McHenry on the Federal Convention of 1787. The  Avalone Project. (http://avalon.law.yale.edu/18th_century/mchenry.asp).
 

On September 15, as the delegates neared  the final draft of the Constitution and as the convention was winding  down, Dr. James McHenry and Mr. Daniel Carroll raised the question of  whether states could charge duties of tonnage--taxes on ships in states'  ports based on their weight. (Appropriately,  delegates from Maryland,  with Baltimore harbor and a strong shipping industry, asked the  question.)  Their concern was over the ability of states to raise  revenues in order to afford improving harbors and building lighthouses.   This was the flip side of the approach authorizing the federal  government to build lighthouses.  His thought was if the federal  government didn't build them, the states would be left with the  obligation of building and maintaining lighthouses and would need a way  to pay for them.  They ultimately settled upon the language: "No state  without the consent of Congress shall lay a duty of tonnage."  

From Notes on Debates in the Federal  Convention of 1787 Reported by James Madison. The Avalone Project.  September 15, 1787  (http://avalon.law.yale.edu/18th_century/debates_915.asp).
 

Madison  explains in Federalist No. 42 a principal reason behind empowering the  federal government to regulate interstate commerce.  “A very material  object of this power was the relief of the States which import and  export through other States, from the improper contributions levied on  them by the latter. Were these at liberty to regulate the trade between  State and State, it must be foreseen that ways would be found out, to  load the articles of import and export, during the passage through their  jurisdiction, with duties which would fall on the makers of the latter,  and the consumers of the former.”  To explain this in simple terms, in  the event a state such as Pennsylvania were to have its goods travel  through New Jersey on their way to New York, the exclusive power to tax  imports and exports in the federal government would prevent New Jersey  from levying a tax on that trade.  
 

Madison was discussing something which became known as the dormant  commerce clause (or negative commerce clause) which holds that the  states cannot regulate commerce because it is a power held by the  federal government to the exclusion of the states. Madison cites as  examples in other countries the Cantons in Switzerland and German  Princes; neither charges tolls or duties on the goods of other Cantons  or German territories when they travel over their territories.  
 

From The Federalist Papers: No. 42.  January 22, 1788. The Avalone Project.  (http://avalon.law.yale.edu/18th_century/fed42.asp)

One  of the first acts passed by the first federal congress was the  Lighthouse Act of 1789, whereby States could either build and maintain  their own lighthouses, or turn over existing lighthouses (and deed over  the land on which they were built) and give power for future lighthouse  construction to the federal government for them to run and control...and  foot the bill.
 

Professor Adam Grace’s law review article--a thorough treatment of the  Lighthouse Act--raised the interesting point that prior to and during  the ratification process, the states constructed and maintained  lighthouses effectively. What occurred to change their construction,  operation and control from the states to the federal government? And why  did it happen in the early days of the new government? From his  research, he concludes the reason the federal government assumed  responsibility over lighthouse construction and operation was “not  important as a national public works policy, but as a taxation policy.”   The Congress wanted to have the power to lay duties of tonnage in order  to raise revenue.  However, by denying states that revenue, states  would not be able to raise money for lighthouses.  If the states  continued to bear the cost of lighthouses, rightfully, they would seek  the approval of Congress, as mentioned above, to charge duties of  tonnage to defray the costs. That would lead to widely disparate tonnage  rates (depending on the state port and the number of lighthouses in  each state) and a similar lack of cohesion reminiscent of the  Confederation days.  Thus, this desire of uniformity led to the  Lighthouse Act of 1789.  Interestingly, that act became a great  legislative precedent for federal control of commerce, and the first  federal assertion of the commerce clause, predating Gibbons v. Ogden by 36 years.
 

In debates over the Lighthouse Act of 1789, the federal government’s  power under the commerce clause to construct and maintain lighthouses  was addressed:
 

“In 1789, when the First Federal Congress first sat, it would not have  been clear to everyone that (1) the federal government had the power to  construct lighthouses; and (2) the power to "regulate" commerce included  the power to "facilitate" commerce by constructing such internal  improvements. Nevertheless, the Commerce Clause precedent created by the  Lighthouse Act remained virtually unquestioned, even while the power to  "construct" improvements and "facilitate" commerce would be debated for  decades in relation to proposed road and canal programs. Whether the  lighthouse precedent was to be accorded broader application was heavily  debated, but the precedent of federal lighthouse building was never  overruled.”
 

Adam  S. Grace, From The Lighthouses: How the First Federal Internal  Improvement Projects Created Precedent that Broadened the Commerce  Clause, Shrunk the Takings Clause, and Affected Early Nineteenth Century  Constitutional Debate, 68 Albany Law Review 97 (2004)

 2 U.S. 1 (1824)
 

QUICK SUMMARY: Chief Justice John Marshall breathes life  into the Commerce Clause, empowering the federal government to regulate  anything and everything traded or that travels in the commerce between  the states.
 

THE FACTS: One of the most famous Supreme Court decision,  and one of Marshall’s great opinions, resolved this Constitutional clash  between Aaron Ogden and Thomas Gibbons.  Aaron Ogden operated a  steamboat ferry service over the Hudson River, under an exclusive  license from the state of New York. Thomas Gibbons operated a competing  steamboat ferry service under a license from the federal government.   When Ogden sought and won an injunction in the New York courts barring  Gibbons from operating his ferry service, this case found its way to the  U.S. Supreme Court.
 

THE DECISION: For the first time in the Supreme Court’s  history, Chief Justice John Marshall expounds upon the Commerce Clause,  with a classic Marshallian flourish.  Marshall made the following  conclusions:
 

What is “Commerce?” More than simply “trade,” commerce includes “all commercial intercourse between nations.”  
 

What is the meaning of “among the several states?” Any “commerce which concerns more States than one.”
 

What does it mean to “regulate?” To “prescribe rules by which commerce is governed.”  
 

Can a State regulate Commerce among the states while Congress is regulating it? Under  the Supremacy Clause an act of Congress is supreme to a state law.   Although a state may act properly in passing a law, if it conflicts with  a federal law, the state law must “yield” to the federal law.
 

Is there any limit to Congress’ power to regulate Commerce? Any limitations to this power exist in the people’s power at the ballot box to vote out a Congress that over reaches.
 

What about the “purely internal affairs” of a state? States have the exclusive power to regulate commerce that begins and ends wholly within a state.
 

THE SIGNIFICANCE OF THE CASE: One of John Marshall’s Triumvirate of cases (along with Marbury and McCullough) expanding the powers of the federal government.  Gibbons  sets the stage for a broad interpretation of the Commerce Clause...and  empowers the Congress and federal government to act boldly in the  future.  For more, visit the Gibbons v. Ogden Steamboat Races  in Big Cases
 

All quotes are from Gibbons v. Ogden 2 U.S. 1 (1824).
 

 53 U.S. 299 (1852)

QUICK SUMMARY: The Court holds the mere existence of the  Commerce Clause does not bar states from regulating commerce over  subjects that do not require uniformity of regulation.
 

THE FACTS: Pennsylvania enacted a statute that required  all vessels entering or leaving the port of Philadelphia to hire a local  pilot or pay a fine (“one half the regular amount of pilotage”) to the  master warden of the port with proceeds to go to “the Society for the  Relief of Distressed and Decayed Pilots, their widows and children.”  Cooley, the owner of the ship “Counsel” which sailed from Philadelphia,  refused to hire a pilot and was fined.  He challenged the law as an  unconstitutional infringement on the Commerce Clause.
 

CONCURRENT FEDERAL AND STATE POWERS TO REGULATE COMMERCE: Justice Benjamin R. Curtis concludes what is settled law since Gibbons,  that the “power to regulate commerce includes the regulation of  navigation.” Additionally, Curtis identifies “pilot laws” as regulation  of navigation and, therefore, under the Congress' Commerce Clause power.  However, simply because Congress has that power, does not preempt the  states from acting: nothing in the Constitution “expressly exclude[s]  the states from exercising an authority over [a] subject matter.” Curtis  contrasts grants of exclusive power to Congress “like that to legislate  for the District of Columbia” with powers concurrent in the federal and  state governments, such as “the power of taxation.” He concludes the  “mere existence” of congressional powers does not preclude the states  from legislating.
 

THE SUBJECT OF REGULATION AND NEED FOR UNIFORMITY: What  determines whether federal power to regulate commerce precludes the same  power in the states?  The court must examine what is being  regulated—sometimes the “subject” of a regulation is of “such a nature  as to require exclusive legislation by Congress.”  That occurs when the  subject or category of regulation “demand[s] a single uniform rule  operating equally on the commerce of the United States.”   So, when a  multiplicity of rules among the numerous state jurisdictions will be an  obstacle to commerce among the states, uniformity is required, and the  subject of that commerce demands a single federal rules and precludes  separate state regulations.
 

THE SIGNIFICANCE OF THE CASE: The debate over how much  power the states have to regulate commerce was one that continues to  this day.  The different extremes included Daniel Webster’s approach,  and argument in Gibbons that the federal government had “complete  exclusive” power under the commerce clause, to Chief Justice Roger  Taney’s concurrent power theory, arguing the states posses full power to  regulate commerce absent conflicting federal law.  Chief Justice John  Marshall allowed for state power over commerce “provided [the states] do  not come into collision with the powers of the general government,  [and] are undoubtedly within those [powers] which are reserved to the  states.” The concurrent powers argument of William Wirt, who was  co-counsel with Webster in Gibbons, carried the day with Justice  Curtis.  Justice Samuel L. Miller in a subsequent opinion commented on  the Cooley decision: “Perhaps no more satisfactory solution has ever  been given of this vexed question than the one furnished [in Cooley].”   According to Bernard Schwartz in A History of the Supreme Court,  “Over a century later, much the same comment can be made…the court has  basically continued to follow the Cooley approach in cases involving the  validity of state regulations of commerce.”  
 

All quotes are from Cooley v. Board of Wardens 53 U.S. 299 (1852). Additional quote Bernard Schwartz, A History of the Supreme Court, pp. 86-87 (1993). 

 156 U.S. 1 (1895)
 

QUICK SUMMARY: The Fuller Court declares unconstitutional  progressive era legislation regulating the manufacture of sugar; the  Supreme Court holds the commerce clause does not permit the federal  government to regulate purely local matters, which are under the control  of the states under their police power.
 

THE SHERMAN ANTI-TRUST ACT: At the end of the 19th  century, with the Industrial Revolution in full swing, the Congress  began passing laws in response to the terrible treatment of America’s  poor and working class.  An important corollary of this movement  involved regulating the monopolistic tendencies of giant corporations.   In 1890, the U.S. Congress passed the Sherman Anti-Trust Act which  declared illegal “every contract, combination in the form of trust or  otherwise, or conspiracy, in restraint of trade or commerce among  several States.”
 

THE FACTS: In 1892 the American Sugar Refining Company  acquired all of the stock of its leading competitors, one of which was  called the E.C. Knight Company, and control over nearly one hundred  percent of the sugar refining business in America. The federal  government filed suit to reverse the sale, under the Sherman Anti-Trust  Act.  This was the Supreme Court’s first review of the constitutionality  of the Act.
 

STATE’S POLICE POWER vs. FEDERAL COMMERCE CLAUSE POWER:  Chief Justice Fuller acknowledges the power of the federal government  under the Commerce Clause but states that it is subject to the police  power of the states.  He defines the police power as “the power of a  State to protect the lives, health, and property of its citizens, and to  preserve good order and the public morals.”  This power is exclusively  in the states and “not surrendered by them to the general government nor  directly restrained by the Constitution of the United States.”   The  issue is to determine whether something falls under the Commerce Clause  or this police power:  “That which belongs to commerce is within the  jurisdiction of the United States, but that which does not belong to  commerce is within the jurisdiction of the police power of the State.”
 

INDIRECT AFFECT: Case establishes a distinction…Congress  cannot regulate something, like manufacturing, that has only an indirect  affect on interstate commerce: “Doubtless the power to control the  manufacture of a given thing involves in a certain sense the control of  its disposition, but this is a secondary, and not the primary, sense,  and although the exercise of that power may result in bringing the  operation of commerce into play, it does not control it, and affects it  only incidentally and indirectly.”
 

MANUFACTURING IS NOT COMMERCE: The court defines  manufacture: “[m]anufacture is transformation -- the fashioning of raw  materials into a change of form for use.” With regards to that process  the court establishes the general rule: “Commerce succeeds to  manufacture, and is not a part of it.”  In sum, just because goods  ultimately find their way into interstate commerce does not mean the  Congress can regulate the manufacture of said goods.   
 

THE SIGNIFICANCE OF THE CASE: Chief Justice Fuller  insulates the manufacture of a good from congressional control under the  commerce clause because if manufacturing were included as part of the  chain of commerce, the power of the Congress would be infinite: “[t]he  result would be that Congress would be invested, to the exclusion of the  States, with the power to regulate not only manufactures, but also  agriculture, horticulture, stock raising, domestic fisheries, mining --  in short, every branch of human industry.”  In a clairvoyant statement  of the future of the Commerce Clause, Fuller cites as an example of the  potential reach of the Commerce Clause: “Does not the wheat grower of  the Northwest or the cotton planter of the South, plant, cultivate, and  harvest his crop with an eye on the prices at Liverpool, New York, and  Chicago?”  Knowing the issue in Wickard v. Filburn and expansion  of congressional Commerce Clause power ushered in by that decision, one  must admire the prescience of Fuller’s opinion.
 

All quotes are from United States vs. E.C. Knight 156 U.S. 1 (1895).  

Champion v. Ames 

188 U.S. 321 (1903)
 

QUICK SUMMARY: John Marshall Harlan, writing for a slim 5  to 4 majority, declares constitutional an act making it illegal to  deliver lottery tickets in interstate commerce.

THE FEDERAL LOTTERY ACT: In 1895 Congress passed “'An Act for  the Suppression of Lottery Traffic through National and Interstate  Commerce and the Postal Service.”  
 

“That any person who shall cause to be brought within the United States  from abroad, for the purpose of disposing of the same, or deposited in  or carried by the mails of the United States, or carried from one state  to another in the United States, any paper, certificate, or instrument  purporting to be or represent a ticket, chance, share, or interest in or  dependent upon the event of a lottery, so called gift concert, or  similar enterprise, offering prizes dependent upon lot or chance…[or the  advertising of same] shall be punishable [for] the first offense by  imprisonment for not more than two years, or by a fine of not more than  $1, 000, or both, and in the second and after offenses by such  imprisonment only.”
 

According to an editorial in the New York Times from 24 February 1903,  lottery tickets were banned from being mailed since 1890.  However, “the  lotteries had recourse to the transportation companies as a means of  carriage.” So, to circumvent anti-lottery laws, lottery tickets would be  transmitted in the Federal Express equivalent of the late nineteenth  century.  So, the language “carried from one state to another” was added  to close this loophole.
 

THE FACTS:  Sometime around February 1, 1899, C.F.  Champion (a/k/a W.W. Ogden and W.F. Champion) and Charles B. Park used  the Wells-Fargo Express Company to send lottery tickets from Dallas,  Texas to Fresno, California for the Pan-American Lottery Company drawing  which took place monthly in Asuncion, Paraguay.  The amount of the  prize was $32,000.00 and tickets were sold for as much as $2.00 for a  full ticket and 25 cents for an eighth of a ticket. Wells-Fargo Express  Company was “a company engaged in carrying freight and packages from  station to station along and over lines of railway.”
 

THE EVOLVING COMMERCE CLAUSE:  During Justice Harlan’s dissertation on the history of the commerce clause, Justice Harlan cites Pensacola Telegraph Co. v. Western U. Telegraph Co.   96 U.S. 1 1877, an opinion by Chief Justice Waite, to explain how the  commerce clause, (like commerce itself), has evolved and expanded to  encompass each era’s own definition of commerce:  “The powers thus  granted are not confined to the instrumentalities of commerce or the  postal service known or in use when the Constitution was adopted, but  they keep pace with the progress of the country, and adapt themselves to  the new developments of time and circumstances. They extend from the  horse with its rider to the stage coach, from the sailing vessel to the  steamboat, from the coach and the steamboat to the railroad, and from  the railroad to the telegraph, as these new agencies are successively  brought into use to meet the demands of increasing population and  wealth.”  
 

In this earlier opinion, Waite reflects on the importance of the telegraph, the matter regulated in the Pensacola  case, to make an important observation that speaks to us today: “The  electric telegraph marks an epoch in the progress of time. In a little  more than a quarter of a century it has changed the habits of business,  and become one of the necessities of commerce.”  Clearly the same could  be said today about the internet, e-mail and e-commerce. 
 

Waite makes a Living Constitution argument—he looked at the founder’s  intent as to the extent of the legislative power under the Commerce  Clause in 1787 and concludes that it would be within the spirit of that  intent for the Congress to have power to regulate telegraphs under said  clause.
 

SUMMARY ON NINETEENTH CENTURY COMMERCE CLAUSE CASES: Analyzing a dozen or so Commerce Clause cases since Gibbons, Justice Harlan establishes four conclusions:
1.    “[C]ommerce among the states embraces navigation, intercourse,  communication, traffic, the transit of persons, and the transmission of  messages by telegraph.
2.    “[T]he power to regulate commerce among the several states is  vested in Congress as absolutely as it would be in a single government.
3.    “[S]uch power is plenary, complete in itself, and may be exerted  by Congress to its utmost extent, subject only to such limitations as  the Constitution imposes upon the exercise of the powers granted by it.”  
4.    “[I]n determining the character of the regulations to be adopted  Congress has a large discretion which is not to be controlled by the  courts, simply because, in their opinion, such regulations may not be  the best or most effective that could be employed.”

ARE LOTTERY TICKETS COMMERCE?: The defendant argued that lottery  tickets, having “no real or substantial value in themselves, were not  properly the subjects of commerce. Justice Harlan dismissed this  argument, holding tickets were bought and sold (“subjects of traffic”)  and entitled the owner to a potential prize. Lottery tickets are given a  value by “those who chose to sell or buy” them and, therefore, properly  defined as items in commerce.

“PUBLIC MORALS” LEGISLATION: A De FACTO FEDERAL POLICE POWER:   Harlan concludes, the power of the federal government to ban lotteries  “for the protection of the public morals” is the equivalent of the same  right in each state to legislate to protect the general welfare of its  citizens—sometimes called the states’ police power: “As a state may, for  the purpose of guarding the morals of its own people, forbid all sales  of lottery tickets within its limits, so Congress, for the purpose of  guarding the people of the United States against the 'widespread  pestilence of lotteries' and to protect the commerce which concerns all  the states, may prohibit the carrying of lottery tickets from one state  to another.”  

THE SIGNIFICANCE OF THE CASE: Harlan (5 to 4 decision)  establishes the federal police power—the power to regulate items in  interstate commerce for the general welfare of the nation.  And so, the  evil "pestilence of lotteries" did not pervert and corrupt clean-cut  red-blooded Americans until the twentieth century when Lotto, Power Ball  and Mega-Millions turned us into a nation of deviant lottery-junkies!
 

All quotes are from Champion vs. Ames 188 U.S. 321 (1903).  

 196 U.S. 375 (1905)
 

QUICK SUMMARY:  Justice Holmes broadly allows Congress to  regulate anything in the “current of commerce” whether or not the part  of the transaction regulated is actually in commerce.
 

THE FACTS:  Defendants are a group of companies that  control 60% of the livestock industry in the U.S. They buy and slaughter  livestock and convert it into beef for consumption, which they in turn  sell throughout the U.S.  These companies formed a monopoly, or  combination, and engaged in anti-competitive practices, to injure the  business of competitors, suppliers, and ultimately increase expenses for  customers. An injunction was sought under the Sherman Anti-Trust Act to  stop the combination from engaging in these “illegal” practices.
 

THE CURRENT OF COMMERCE ARGUMENT: The defendants argued that the law was attempting to regulate non-commercial matters.  This was similar to the argument in E.C. Knight  where the court would not allow the regulation of manufacturing.   Justice Holmes concluded “commerce among the states is not a technical  legal conception, but a practical one.”  Although some of the elements  regulated were not commerce, they were all a part of the same commercial  process:
 

“When cattle are sent for sale from a place in one State, with the  expectation that they will end their transit, after purchase, in  another, and when, in effect, they do so, with only the interruption  necessary to find a purchaser at the stockyards, and when this is a  typical, constantly recurring course, the current thus existing is a  current of commerce among the States, and the purchase of the cattle is a  part and incident of such commerce.”
 

Thus, Holmes introduces the “current of commerce” argument, sometimes  called the stream of commerce argument.  The various steps may have  taken place intrastate (wholly within one state), but they were all part  of a current of commerce that took place in numerous steps and,  ultimately, in interstate commerce
 

WHAT WERE THE ANTI-COMPETITIVE PRACTICES? As an aside, the  way in which the titans of the beef industry unlawfully competed with  the smaller companies is summarized in the case.  It is a good  explanation of the many unlawful practices engaged in by trusts or  monopolies in this era:
 

“ [A] dominant proportion of the dealers in fresh meat throughout the  United States [colluded] not to bid against each other in the livestock  markets of the different States, to bid up prices for a few days in  order to induce the cattle men to send their stock to the stockyards, to  fix prices at which they will sell, and to that end to restrict  shipments of meat when necessary, to establish a uniform rule of credit  to dealers and to keep a blacklist, to make uniform and improper charges  for cartage, and finally, to get less than lawful rates from the  railroads to the exclusion of competitors.”
 

THE SIGNIFICANCE OF THE CASE:  A significant (9 to 0)  decision which “abandoned the restrictive interpretations of its  earliest antitrust holdings and accepted a broader definition of the  federal commerce power.”   The “current of commerce” argument was a  powerful extension of the Commerce Clause, but not sufficiently used at  the time.  As has been identified by Constitutional law scholars: “The  ‘stream of commerce’ doctrine remained an untapped resource until the  1930s, when the New Deal Court restored expansive readings of the  commerce clause power.”
 

All quotes are from Swift and Company v. U.S. 196 U.S. 375 (1905). Additional quotes from The Oxford Guide to United States Supreme Court Decision, Kermit L. Hall, ed., Oxford University Press, 1999, (pp. 298-299). 

Houston. East & West Texas Railway Co v. US

 34 U.S. 243 (1914)
 

THE FACTS: Rates charged by carriers for transport between  Shreveport, Louisiana (westward) to cities in Texas were much greater  than rates charged for transport between Dallas and Houston and the same  cities (eastward) in Texas.  These disparate charges, on the lines of  the Houston, East & West Texas and Houston & Shreveport  Companies would be charged even where the distances traveled from  Shreveport were shorter than the distance traveled from Houston and  Dallas.  The difference in rates was “substantial and injuriously  affected the commerce of Shreveport.”  In short, based on the disparate  rates the Texas carriers “unjustly discriminated in favor of traffic  within the state of Texas.” The Railroad Commission of Louisiana brought  suit in the commerce court of the Interstate Commerce Commission (ICC)  whose authority to regulate intrastate rates (wholly within Texas) was  challenged.
 

“PARAMOUNT CHARACTER” OF THE COMMERCE CLAUSE: Justice  Charles Evans Hughes (back in the simple days before he was chief  justice) writes in his majority opinion of the “paramount character of  the power confided to Congress to regulate commerce among the several  states.” He concludes, if Congress has the power, it “dominates” in that  field. By looking to the original intent of the founding fathers, he  explains the necessity for this federal supremacy: “The purpose was to  make impossible the recurrence of the evils which had overwhelmed the  Confederation, and to provide the necessary basis of national unity by  insuring 'uniformity of regulation against conflicting and  discriminating state legislation.'”
 

WHERE INTRASTATE AND INTERSTATE ACTIVITY IS INTERTWINED:  Sometimes activity which takes place wholly within one state  (intrastate) cannot be separated from the interstate activity.  When  that happens, the federal government has the power to regulate both the  intrastate and interstate components of the activity: “Wherever the  interstate and intrastate transactions of carriers are so related that  the government of the one involves the control of the other, it is  Congress, and not the state, that is entitled to prescribe the final and  dominant rule, for otherwise Congress would be denied the exercise of  its constitutional authority, and the state, and not the nation, would  be supreme within the national field.”  The only question that remained,  according to Justice Hughes, was whether the attempted regulation was  proper.  To Hughes, it was:  “We find no reason to doubt that Congress  is entitled to keep the highways of interstate communication open to  interstate traffic upon fair and equal terms. *** The use of the  instrument of interstate commerce in a discriminatory manner so as to  inflict injury upon that commerce, or some part thereof, furnishes  abundant ground for Federal intervention.”  The fact that the  discriminatory rates affected intrastate as opposed to interstate  regulation was deemed “immaterial.”
 

WHAT WAS THE INTERSTATE COMMERCE COMMISSION?  Created by  the Interstate Commerce Act, passed in 1887, the Interstate Commerce  Commission regulated America’s railroad industry.  The ICC, the first  regulatory agency in America, consisted of a five member board,  prevented monopolies from being formed by the largest few railroads, and  fought discriminatory rate charging practices, such as special  (discount) rates which railroads would charge for other captains of  industry.  Although regulation proved difficult early on, the power of  the ICC was greatly enhanced by passage of the Hepburn Act of 1906 and  Mann-Elkins Act in 1910 which further defined the ICC’s regulatory power  and shifted the burden of proof as to the reasonableness of rates  charged onto the railroads. The ICC’s power continued to grow, and  eventually included regulating eight-hour work days for railroad  employees, and culminated in government takeover of the railroads from  1918 to 1920.
 

For more information see Interstate  Commerce Act – American Experience:  http://www.pbs.org/wgbh/americanexperience/features/general-article/streamliners-commerce/
 

THE SIGNIFICANCE OF THE CASE: The ICC was a forerunner to  the plethora of New Deal agencies that followed.  Thus, the decision (7  to 2) set a strong precedent for the Supreme Court’s expansive approach  to the Commerce Clause from the late 1930s and beyond.
 

All quotes are from Houston, East & West Texas Railway Co. v. U.S.  234 U.S. 243 (1914).  

 247 U.S. 251(1918)

THE KEATING-OWEN ACT of 1916: Enacted September 1, 1916, the act  attempted to fight the exploitive practice of hiring child labor in the  United States through the power of the Commerce Clause. The act  “prohibit[ed] transportation in interstate commerce of goods made at a  factory in which, within thirty days prior to their removal therefrom,  children under the age of 14 years have been employed or permitted to  work, or children between the ages of 14 and 16 years have been employed  or permitted to work more than eight hours in any day, or more than six  days in any week, or after the hour of 7 P.M. or before the hour of 6  A.M.
 

THE FACTS: Roland Dagenhart, the father of two minor sons  (one under age 14 and one under age 16) worked with his sons in a cotton  mill in Charlotte, North Carolina. He challenged the constitutionality  of the Keating-Owen Act of 1916 which denied his children the freedom to  work.  
 

PRIOR INSTANCES OF COMMERCE CLAUSE REGULATION:  From his reading of Gibbons,  Justice William Day concluded the Commerce Clause power “is one to  control the means by which commerce is carried on” and not to “forbid”  certain types of commerce “and thus destroy it as to particular  commodities.”  To Justice Day, when congress regulates “commodities” it  does so “[based] upon the character of the particular subjects dealt  with.” He cited as examples Champion v Ames which allowed a law that banned lottery tickets, Hipolite Egg Co. v. U.S. which held the Pure Food and Drug Act constitutional and Hoke v. U.S.  which deemed the White Slave Traffic Act” banning the transportation of  women for prostitution. The “exceptional power exerted” under the  Commerce Clause in these instances was based on “the exceptional nature  of the subject here regulated.” (Citing Clark Distilling Co. v. Western Maryland Railway Co.  242 U.C. 311 which regulated the transportation of liquor.)  Since the  transportation of the items was the evil attempting to be curbed,  “interstate transportation was necessary to the accomplishment of the  harmful results.”  However, with child labor, transportation of the  goods had nothing to do with the evil.
 

MANUFACTURING AND MINING ARE NOT COMMERCE: Reverting to the E.C. Knight  rationale, Justice Day concluded: “The making of goods and the mining  of coal are not commerce, nor does the fact that these things are to be  afterwards shipped, or used in interstate commerce, make their  production a part thereof.”  By concluding as such, Day utterly ignored  the “current of commerce” theory of Justice Holmes in Swift.  In Day’s  view, the Commerce Clause gave Congress power over commerce, alone, “not  to give it authority to control the States in their exercise of the  police power over local trade and manufacture.”

HOLMES’ DISSENT:  Justice Day’s slim 5 to 4 decision had a  strong dissent from the Great Dissenter himself, Justice Oliver Wendell  Holmes.  In it he points out the departure the majority opinion takes  from a line of Supreme Court opinions empowering Congress through the  Commerce Clause.  He also points out the logical flaws with the opinion.
 

Holmes disputes the regulation-of-evils-only argument by criticizing the  court for using its view of morality to identify what is or is not  evil, since that is not the job of a court:
 

“The notion that prohibition is any less prohibition when applied to  things now thought evil I do not understand. But if there is any matter  upon which civilized countries have agreed -- far more unanimously than  they have with regard to intoxicants and some other matters over which  this country is now emotionally aroused--it is the evil of premature and  excessive child labor. I should have thought that, if we were to  introduce our own moral conceptions where in my opinion they do not  belong, this was preeminently a case for upholding the exercise of all  its powers by the United States.”
 

It is in the exclusive power of Congress to determine whether it is  proper purpose for a power to be exercised: “the propriety of the  exercise of a power admitted to exist in some cases was for the  consideration of Congress alone, and that this Court always had  disavowed the right to intrude its judgment upon questions of policy or  morals.”
 

Finally, Holmes gives an excellent explanation of federalism—one that  looks to the future of congressional law in the twentieth century and  beyond: “The act does not meddle with anything belonging to the States.  They may regulate their internal affairs and their domestic commerce as  they like. But when they seek to send their products across the state  line, they are no longer within their rights. If there were no  Constitution and no Congress, their power to cross the line would depend  upon their neighbors. Under the Constitution, such commerce belongs not  to the States, but to Congress to regulate. It may carry out its views  of public policy whatever indirect effect they may have upon the  activities of the States. Instead of being encountered by a prohibitive  tariff at her boundaries, the State encounters the public policy of the  United States, which it is for Congress to express. The public policy of  the United States is shaped with a view to the benefit of the nation as  a whole….The national welfare, as understood by Congress, may require a  different attitude within its sphere from that of some self-seeking  State. It seems to me entirely constitutional for Congress to enforce  its understanding by all the means at its command.”

THE SIGNIFICANCE OF THE CASE: Laissez Faire is alive and well in this era of Lochner.  However, Holmes’ famous dissent certainly predicts the future.
 

All quotes are from Hammer v. Dagenhart  247 U.S. 251 (1918).  

 In a series  of cases from 1936 to 1942, the Commerce Clause transformed into the  all-empowering grant of power that we know today. During those years, a  seismic shift took place in the Supreme Court's jurisprudence with  respect to economic regulations, federalism and the power of Congress.   From the last gasps of federalism in Carter v. Carter Coal Co. to the seemingly limitless substantial effects test in Wickard v. Filburn, the Commerce Clause reached its full potential—perhaps beyond the founders wildest dreams. ..or nightmares.

 295 U.S. 495 (1935)
 

THE NATIONAL INDUSTRIAL RECOVERY ACT: Among the multitude  of alphabet nick-named administrative agencies passed under FDR’s New  Deal program to combat the Great Depression , the centerpiece was the  National Industrial Recovery Act.  Drafted, in the words of FDR himself,  to “put people back to work” the NIRA did three things.  First, it  created the Public Works Administration, to fund large public projects,  and put the unemployed back to work in the immediate future.  Second, it  created the National Recovery Administration which would encourage  businesses in a variety of industries to get together and establish fair  competitive practices, on a voluntary basis. Production and prices  would be controlled, and anti-trust laws would be suspended. Finally,  the NIRA authorized President Roosevelt to enact administrative codes  regulating various industries, promulgating maximum hours, minimum  wages, banning unfair competition practices and providing for inspection  of products.  Eventually, 557 codes were implemented by the Roosevelt  administration—one was called the “Live Poultry Code” which regulated  the national poultry industry
 

From David M. Kennedy, Freedom From Fear, pp. 150-151. From Amity Shales, The Forgotten Man: A New History of the Great Depression, pp. 150-151
 

FACTS:  Joseph Schechter and his brothers operated the Schechter Live  Poultry Market in Brooklyn, New York. They purchased live poultry from  the West Washington Market in New York City from intermediaries  ("commission men") and occasionally from intermediaries in Philadelphia.  The poultry was "trucked" to their slaughterhouses in Brooklyn and  "sold usually within twenty-four hours, to retail poultry dealers and  butchers who sell directly to consumers." Before sale, the poultry was  slaughtered by "schochtim" ("slaughterers") employed by Schechter.  Importantly, (to the justices, at least); "[d]efendants do not sell  poultry in interstate commerce.”
 

The Schechters ran a-fowl (hahahahaha) of the Live Poultry Code by not  following "the minimum wage and maximum hour provisions of the Code."  Additionally, the Schecters did not comply with Code inspections,  falsified records, did not maintain reports and sold to dealers without  licenses.  Finally, they did not follow the requirement of "straight  killing" or as Justice Hughes identified it, "straight selling." To  improve efficiency, the Code required poultry sellers to sell the first  chicken they grabbed in a coop; it did not allow buyers to choose the  chickens they wanted to purchase.  In  the words of Joseph Heller, the  Schechters’ attorney, during oral arguments: “His customer is not  permitted to select the [chicken] 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.”
 

Additional facts from The Forgotten Man, p. 241
 

THE TENTH AMENDMENT vs. THE GREAT DEPRESSION:  Chief  Justice Hughes begins by conceding the severity of the Great  Depression—“the grave national crisis with which Congress was  confronted.” Although he concedes that "[e]xtraordinary times may call  for extraordinary measures…[but crises] do not create or enlarge  constitutional powers.”  The Tenth Amendment, which reserves all powers  not “delegated” to the federal government “to the states, respectively,  or the people” was drafted and passed to prevent Congress from  exercising “extraconstitutional authority.”  In practice, the codes  promulgated by the NIRA were not simply voluntary but a “coercive  exercise of the lawmaking power.”  
 

THE DELEGATION ISSUE: The NIRA authorizes the president to  pass various codes regulating numerous industries—a power akin to  making laws.  To the Court, this was a separation of powers violation  that doomed the statute: “the code-making power authority conferred is  an unconstitutional delegation of legislative power.”

INTRASTATE COMMERCE THAT HAS COME TO A “PERMANENT REST:   According to Chief Justice Hughes, the Live Poultry Code improperly  regulated matters taking place entirely within one state (intrastate).   Once the poultry arrived at the slaughterhouse in Brooklyn, “interstate  transactions in relation to that poultry then ended.”  Thereby, the  “slaughtering” and “sales” by the Schechters were not “transactions in  interstate commerce” and could not be regulated. Dismissing the “current  of commerce” argument of Justice Holmes, Hughes concludes  “[t]he  poultry had come to a permanent rest within the State” and the “flow in  interstate commerce has ceased.”
 

DIRECT vs. INDIRECT AFFECTS TEST: Hughes returns to this analysis which dates back to E.C. Knight,  that allows regulation of only those matters that have a “direct  effect” on interstate commerce. In identifying whether something has a  direct or indirect effect, “[t]he precise line can be drawn only as  individual cases arise.”   While the distinction itself is imprecise,  the necessity for it is laid out convincingly by Chief Justice Hughes:
 

“If the commerce clause were construed to reach all enterprise and  transactions which could be said to have an indirect effect upon  interstate commerce, the federal authority would embrace practically all  the activities of the people.”  Without the direct vs. indirect  distinction, “there would be virtually no limit to the federal power  and, for all practical purposes, we should have a completely centralized  government.” Hughes does not attempt to evaluate the “economic  advantages and disadvantages of such a centralized system” but concludes  “the Federal Constitution does not provide for it.”

THE SIGNIFICANCE OF THE CASE:  Declaring the hours and wages of  employees and the methods for selecting chicken a local matter with, at  most, an indirect effect on commerce, the Code was held to be invalid.   The unanimous decision by the Supreme Court was one of the controversial  anti-New Deal decisions which set off, along with Roosevelt’s  subsequent landslide victory in the 1936 election, the Court Packing  Scheme.
 

All quotes are from A.L.A. Schecter Poultry Corp. v. U.S. 295 U.S. 495 (1935).  

 298 U.S. 238 (1936)

FACTS: The “Bituminous Coal Conservation Act of 1935” was  passed for the purpose of regulating the national coal industry.  The  Act created a national coal commission, separated the country into  various coal districts run by local boards and fixed prices, wages,  hours and improved working conditions of miners.  The statutory scheme  imposed a 15% excise tax on the sale of coal by coal companies  throughout the country, but allowed a 13½ “draw-back” or refund to those  companies in the industry who voluntarily followed the regulations  imposed by the Act.    James W. Carter, a shareholder in the company,  was against cooperating with the act.  The board voted against him,  fearing payment of the full tax without the “draw-back” would bankrupt  the company.  Mr. Carter, a stockholder in the company, brought suit to  enjoin his company from complying with the tax because the Act was  unconstitutional.

GOVERNMENT OF ENUMERATED POWERS- THE TENTH AMENDMENT:  Referencing the Tenth Amendment as the protection implemented by the  founders to assure a future Congress did not attempt to legislate for  the general welfare (as the Congress seemed to be doing under the  current Act), Justice George Sutherland explained “this is a government  of enumerated powers.”  Since the states pre-dated the federal  government, their legislative powers, similarly, “antedated” the power  of the federal government.  The Tenth Amendment ("which was seemingly  adopted with prescience of just such contention as the present") assured  that the federal government shall not "attempt to exercise powers which  had not been granted" in Article 1 Section 8 of the Constitution.  Expansion of the enumerated powers "should only be granted by the  people" through the Article V Amendment process.

FEDERALISM: SUPERIORITY OF STATE POWERS WHERE STATES ARE SOVEREIGN: The old guard’s approach to federalism is encapsulated in a few paragraphs by Justice Sutherland:  “Those who framed and those who adopted [the Constitution] meant to  carve from the general mass of legislative powers, then possessed by the  states, only such portions as it was thought wise to confer upon the  federal government.
 

“The national powers of legislation were not aggregated but  enumerated…with the result that what was not embraced by the enumeration  remained vested in the states without change or impairment. *** [The  federal government] possesses no inherent power in respect of the  internal affairs of the states. *** The determination of the Framers  Convention and the ratifying conventions to preserve complete and  unimpaired state self-government in all matters not committed to the  general government is one of the plainest facts which emerges from the  history of their deliberations.”
 

FEDERALISM’S LAST HURRAH: In one of the last opinions  respecting the strong walls of federalism, a voice from the past—from  the fading and foggy federalism of yesteryear—attempts to balance the  economic independence of the states, while respecting the power of the  federal government.  This philosophy would soon be left only in dusty  casebooks in slowly obscuring locations in law libraries. However,  Sutherland’s eloquent essay on federalism still speaks to the American  people—those who are still listening—when they lament the omnipotence of  the federal government.  
 

 “Every journey to a forbidden end begins with the first step; and the  danger of such a step by the federal government in the direction of  taking over the powers of the states is that the end of the journey may  find the states so despoiled of their powers, or--what may amount to the  same thing--so  relieved of the responsibilities which possession of  the powers necessarily enjoins, as to reduce them to little more than  geographical subdivisions of the national domain. It is safe to say that  if, when the Constitution was under consideration, it had been thought  that any such danger lurked behind its plain words, it would never have  been ratified.”
 

JUDICIAL REVIEW OF BENEFICIAL LAWS: The Constitution,  being the supreme law of the land, is supreme to Congressional laws,  dating back to Marbury v. Madison. And, in Sutherland’s best John  Marshal impersonation, he explains why it is his judicial duty to  invalidate unconstitutional laws, even good ones:
 

“[S]upremacy of a statute enacted by Congress is not absolute but  conditioned upon its being made in pursuance of the Constitution. And a  judicial tribunal, clothed by that instrument with complete judicial  power, and, therefore, by the very nature of the power, required to  ascertain and apply the law to the facts in every case or proceeding  properly brought for adjudication, must apply the supreme law and reject  the inferior statute whenever the two conflict. In the discharge of  that duty, the opinion of the lawmakers that a statute passed by them is  valid must be given great weight; but their opinion, or the court's  opinion, that the statute will prove greatly or generally beneficial is  wholly irrelevant to the inquiry.”
 

MANUFACTURING IS NOT COMMERCE: With Sutherland’s grand  statements about American Constitutional government and federalism  behind him he gets down to the nuts and bolts of his Commerce Clause  analysis.  In a throwback to E.C. Knight Sutherland remembers the old  distinction, that what takes place wholly within one state PRIOR to  being in commerce is NOT commerce despite any intent or subsequent  transport in interstate commerce.  He concludes, simply, manufacturing  is not commerce; the production or manufacture of goods “within a state”  which are intended to be sold or transported outside the state does not  render their production of manufacture subject to federal regulation  under the commerce clause.”
 

It’s the flip side of Schecther—the federal government cannot  constitutionally regulate activity not yet in interstate commerce  (Carter) nor can it regulate activity that has come to rest in its final  destination post- interstate commerce (Schecther).
 

LAST DAYS OF INDIRECT vs. DIRECT: THE LOCAL EVILS TEST: Referencing  and expanding upon Schechter, Sutherland attempts to flesh out this  fuzzy and subjective test.  To explain a direct effect, Sutherland  explains the activity must not have “an efficient intervening…condition”  between the activity and the interstate commerce.  The focus with  direct vs. indirect, according to Sutherland, is not on “the magnitude”  of the activity but on “the manner” of the activity.  So, if someone  produces “a single ton of cool intended for interstate commerce…the  effect does not become direct by multiplying the tonnage.” As much as  Congress wants to put an end to “the evils which come from the struggle  between employers and employees…[these] are local evils over which the  federal government has no legislative control.”  
 

THE SIGNIFICANCE OF THE CASE: The few excerpts from the case, particularly the oft-quoted and evocative “journey to a forbidden end” are the old-guard’s warning to future generations of the danger of an America without federalism. Carter represents the  last stand of the Four Horseman of the Apocalypse.  For better or worse,  within one year, Commerce Clause jurisprudence would never be the same.
 

All quotes are from Carter v. Carter Coal Co. 298 U.S. 238 (1936).  

 301 U.S. 1 (1937)
 

THE NATIONAL LABOR RELATIONS ACT:  Passed in July 1935,  and also known as the Wagner Act for its sponsor, New York Senator  Robert R. Wagner, this pro-union law protected workers’ rights to  organize.  Its mission, as stated in the preamble to the Act was “to  protect the rights of employees and employers, to encourage collective  bargaining, and to curtail certain private sector labor and management  practices, which can harm the general welfare of workers, businesses and  the U.S. economy.”  The NLRA covered employers in all industries in  interstate commerce, except airlines, railroads, agriculture and  government.  The National Labor Relations Board (created under the Act)  was authorized to arbitrate labor-management disputes, guarantee fair  union elections, and penalize employers engaging in unfair labor  practices.  The NLRA “sets forth the right of employees to  self-organization and to bargain collectively through representatives of  their own choosing.”  The Act, one of the strongest pro-union  statements by the Congress, “contributed to a dramatic surge in union  membership and made labor a force to be reckoned with both politically  and economically.”
 

For more information (and for the source of the quote) see the National  Labor Relations Act at www.ourdocuments.gov  http://www.ourdocuments.gov/doc.php?flash=true&doc=67
 

FACTS: The Beaver Valley Lodge, an affiliate of the  Amalgamated Association of Iron, Steel and Tin Workers of America, a  labor organization, brought a proceeding under the National Labor  Relations Act of 1935 against Jones & Laughlin Steel Corporation  alleging unfair labor practices. Specifically, the union alleged the  Corporation coerced, intimidated and discharged persons trying to  unionize.  The NLRB ordered Jones and Laughlin to cease and desist from  these practices and reinstate ten employees, but the corporation refused  to comply.  The NLRB attempted to enforce its order in the Circuit  Court of Appeals, but the court denied the petition, holding “the order  lay beyond the range of federal power.”

ACTS BURDENING OR OBSTRUCTING INTERSTATE COMMERCE: Chief Justice  Hughes identifies the purpose of the Act, as laid out by Congress:  “[The Act] purports to reach only what may be deemed to burden or  obstruct [foreign or interstate] commerce.”  It seems, Hughes is taking  Congress’ stated intent at face value.  He identifies a “familiar  principal that acts which directly burden or obstruct interstate or  foreign commerce, or its free flow, are within the reach of the  congressional power.” The inquiry to Hughes is “the effect upon  commerce, not the source of the injury.” The question “[w]hether or not  particular action does affect commerce in such a close and intimate  fashion as to be subject to federal control” was to be determined on a  case by case basis. Congress on passing the NLRA simply intended to  "safeguard the right of employees to self-representation and to select  representatives of their own choosing for collective bargaining."   According to Hughes, this is a "fundamental right...proper[ly] subject  for condemnation by competent legislative authority.”
 

THE SUBSTANTIAL RELATIONS TEST: Having established that  the activity was one the Congress could properly regulate, it remained  for Hughes to establish the Commerce Clause as the proper enabling  authority. To do so, Hughes looks to whether there is a "substantial  relation" between the inter- and intra- state commerce.  He establishes  the new test for Commerce Clause analysis as he explains: "although  activities may be intrastate in character when separately considered, if  they have such a close and substantial relation to interstate commerce  that their control is essential or appropriate to protect that commerce  from burdens and obstructions, Congress cannot be denied the power to  exercise that control."  In order to preserve “our dual system of  government" and not destroy "the distinction between what is national  and what is local" Hughes allows congress to regulate any activity that  “threatens to obstruct or unduly burden the freedom of interstate  commerce.”  Referencing the Shreveport Rate Case, he identifies the  intrastate activities of “carriers” (i.e. railroads) as something that  Congress can properly regulate. So, in Shreveport, the “local activity”  of rates wholly within a state could be regulated by Congress properly  because “they bear such a close relation to interstate rates that  effective control of the one must embrace some control over the other.”   It did not matter that the employees here were “engaged in production”  which had been considered a local activity in past decisions.  The  question is one of the effect on interstate commerce of aspects of that  production.  To tie in his decision with current Commerce Clause  jurisprudence, Hughes, with little explanation distinguished both Schechter, finding the effects there “remote” and Carter because of the “improper delegation of legislative power.”

REJECTION OF DIRECT vs. INDIRECT TEST: Hughes abandons the old  direct vs. indirect test, for its failure to acknowledge the potentially  “catastrophic” effect of work stoppages in localities across the  country. Congress, thus, must be allowed to pass laws that “protect  interstate commerce from the paralyzing consequences of industrial war.”  In short, labor relations at Jones and Laughlin clearly depict “the  close and intimate relation which a manufacturing industry may have to  interstate commerce.”  Thus, the NLRB acted properly, and the National  Labor Relations Act was a valid exercise of the Commerce Clause power of  Congress.
 

McREYNOLDS’ DISSENT: Joined by the other three members of  the Four Horsemen of the Apocalypse—Justices Van Devanter, Sutherland  and Butler—McReynolds carried the vanishing flag of federalism in his  dissent to this five to four opinion.  Calling the “far-reaching”  majority opinion “a departure from what we understand has been  consistently ruled here” in Kidd v. Pearson, Carter and Schechter,  and labeling the powers of the three person Board “extraordinary,”  McReynolds argues, “that view of congressional power would extend it  into almost every field of human industry.”  To the four horsemen, the  effect of discharging ten employees on interstate commerce was “indirect  and remote in the highest degree.”  McReynolds prophetically predicts  that if Congress can act in this way based on the Commerce Clause,  “[a]lmost anything--marriage, birth, death--may in some fashion affect  commerce” and be proper grounds for Congressional regulation.  “It seems  clear to us that Congress has transcended the powers granted.”  That  flag of federalism unfurled by McReynolds, would soon be in mothballs.

THE SIGNIFICANCE OF THE CASE: The new majority (established with the alleged “switch in time” of West Coast Hotel v. Parrish)  establishes the substantial effects test—one which will allow Congress  broad powers, remove the Supreme Court from evaluating economic  regulations and see the Commerce Clause enable Congress to act however  it sees fit for the next 50 years, and beyond.
 

All quotes are from N.L.R.B. v. Jones & Laughlin Steel Corp. 301 U.S. 1 (1937).  

 312 U.S. 100 (1940)
 

THE FAIR LABOR STANDARDS ACT: Signed into law on June 25,  1938, after Congress had adjourned, the FLSA banned child labor, set a  minimum hourly wage of .25 cents an hour and a maximum work week of 44  hours. The enabling power was the Commerce Clause.  As the case itself  explains: “[The FLSA] set up a comprehensive legislative scheme for  preventing the shipment in interstate commerce of certain products and  commodities in the United States under labor conditions as respects  wages and hours which fail to conform to standards set by the Act.”  So,  if products are manufactured by companies that did not comply with the  FLSA (as to wages, hours and child labor) Congress could penalize them  under the Commerce Clause.
 

As legend has it, once FDR emerged victorious from his attempts to pack  the court (the court-packing scheme being unnecessary after Justice  Roberts’ switch in West Coast Hotel v. Parrish) he asked his  Secretary of Labor Frances Perkins “What happened to that nice  unconstitutional bill you tucked away?”  The draft bill was worked on by  Thomas Corcoran and Benjamin Cohen, two of FDR’s legal advisers and  brain trusters, strengthened with a prohibition on child labor (under  16) and introduced by the president in spring 1937 proclaiming America  must give “all our able-bodied working men and women a fair day’s pay  for a fair day’s work.”  A contentious yearlong battle ensued and after  re-writes and much politicking, the FLSA became law.  The act is  considered the “last major piece of New Deal legislation.” 
 

From The Oxford Guide to United States Supreme Court Decisions, Kermit L. Hall ed., 1999, p. 70. Historical  material from the U.S. Department of Labor website article Fair Labor  Standards Act of 1938: Maximum Struggle for a Minimum Wage, by Jonathon  Grossman. http://www.dol.gov/oasam/programs/history/flsa1938.htm

FACTS: The Darby Lumber Company was “engaged, in the State of  Georgia, in the business of acquiring raw materials” a/k/a trees, and  converting them into finished lumber which was then shipped in  interstate commerce.  The company did not pay employees the minimum wage  required under the FLSA and employed them for hours in excess of the  maximum hours under the Act, without paying overtime.  They were brought  up on a series of counts in violation of the Act; Darby challenged the  constitutionality of the Act.
 

RETURN TO THE FEDERAL POLICE POWER: Justice Harlan Fiske  Stone, writing for a unanimous (8 to 0) court, began by acknowledging  “the power of Congress to prohibit transportation in interstate commerce  of noxious articles.”  He cites as precedent the Champion v. Ames(the Lottery Case), Hipolite Egg Co. v. US, and Hoke v. US  which banned, respectively lottery tickets, improperly labeled eggs  (regulated under the Pure Food and Drug Act), and women transported for  illicit purposes (regulated under the Mann Act).  The premise of those  cases is that Congress can regulate and exclude from interstate commerce  any articles it deems “injurious to the public health, morals or  welfare.”  This is a police power that the states enjoy and, as was  identified in the Lottery Case, it is the equivalent in Congress...a  sort of Federal Police Power.  However, the items regulated need not be  harmful, as Hammer v. Dagenhart held.  The requirement that  Congress can only regulate “harmful or deleterious” items enunciated by  Hammer “was novel when made and unsupported by any provision of the  Constitution, [it] has long since been abandoned.”
 

SUBSTANTIAL EFFECTS TEST:  Continuing along with the NLRB v. Jones & Laughlin  rationale, Stone allowed Congress to regulate activities, even wholly  intrastate activities, provided they had “a substantial effect” on  commerce.  Citing precedent, Stone concludes, Congress may “require  inspection and preventive treatment of all cattle” and mandate  inspections of tobacco, even if only a portion of the items will travel  in interstate commerce.  Again, the strongest precedent, like in Jones  and Laughlin, was the Shreveport Rate Case where intrastate railway  rates could be regulated based on their effect on interstate commerce.

THE SIGNIFICANCE OF THE CASE:  By the time the Darby decision is  handed down, the Four Horsemen of the Apocalypse are merely a  historical footnote to the history of the court. Justice Willis Van  Devanter retired in 1937 and was replaced by Justice Hugo Black (FDR  appointee).  Justice George Sutherland retired in 1938, and was replaced  by Justice Stanley Reed (FDR appointee).  Justice Pierce Butler died in  1939 while still on the court.  His vacated seat was filled by Justice  Frank Murphy (FDR appointee).  The last horseman, Justice James  McReynolds, retired in 1941 and was replaced by Justice James Byrnes.   McReynolds recused himself from the decision, hence the unanimity. The  transformation of the Commerce Clause into an omnipotent superpower was  complete.

All quotes are from U.S. v. Darby 312 U.S. 100 (1940).

 

 THE AGRICULTURAL ADJUSTMENT ACT:  On May 13, 1933, FDR signed the Agricultural Adjustment Act into law  (AAA).  Drafted by Secretary of Agriculture Henry Wallace and Assistant  Secretary of Agriculture, brain truster (and agricultural economist)  Rexford Tugwell, one of the central aspects of the AAA was “planned  scarcity,” whereby farmers were encouraged to produce less through  various methods, including direct payments to farmers who did not grow  crops (benefit payments), loans to those who stored crops and  destruction of crops and livestock. (This last, and most controversial  step was only done in 1933 and only to cotton crops and pigs because the  Act was not passed before the season began).  To quote President  Roosevelt, from a speech to farmers in 1935:
 

“[The  AAA enacted] a plan for the adjustment of totals in our major crops, so  that from year to year production and consumption would be kept in  reasonable balance with each other, to the end that reasonable prices  would be paid to farmers for their crops and unwieldy surpluses would  not depress our markets and upset the balance.”
 

From FDR's Address on Agricultural Adjustment Act, May 14, 1935 http://www.pbs.org/wgbh/americanexperience/features/primary-resources/fdr-aaa/

Simply, taxes and penalties collected by the AAA would raise money that  would be used to pay subsidies to farmers if they did not plant crops,  or did not bring crops to market, thus artificially maintaining the  price of significant crops. To quote from the Wickard opinion: 
 

“The general scheme of the Agricultural Adjustment Act of 1938 as  related to wheat is to control the volume moving in interstate and  foreign commerce in order to avoid surpluses and shortages and the  consequent abnormally low or high wheat prices and obstructions to  commerce.”
 

The AAA of 1933 was declared unconstitutional in U.S. v. Butler  297 U.S. 1 (1936); the Court held the tax on the agricultural processors  violated the Tenth Amendment because it attempted to regulate  production, a matter controlled by the states.   After the Court’s  alleged “switch in time,” a new Agricultural Adjustment Act of 1938 was  passed supposedly remedying the unconstitutional aspects of the earlier  AAA. It was not so much the constitutionality of the laws that changed,  as much as the philosophies of the justices.  The court held in Mulford v. Smith  307 U.S. 38 (1939) that the AAA of 1938 was constitutional.  To quote  Professor Jim Chen, an authority on Wickard: “though the tobacco  marketing quotas imposed by the Agricultural Adjustment Act of 1938  intruded far more aggressively into the farm economy than the processing  taxes inspired by the 1933 Act, Mulford approved the 1938 Act  with little fanfare. Whereas the 1933 Act had been condemned merely  three years earlier as an unconstitutional "plan to regulate and control  agricultural production, a matter beyond the powers delegated to the  federal government," (U.S. v. Butler 297 US 1, 68 (1936), Mulford blessed the 1938 Act as a program "intended to foster, protect and conserve [interstate] commerce." Mulford v. Smith, along with US v. Darby and several other decisions allowed Roosevelt to “reinvent the Commerce Clause.”  Jim Chen, Filburn’s Legacy, 52 Emory Law Journal 1719 (2003). 
 

For the historical background to the Agricultural Adjustment Act I have  relied on the sources quoted above and David M. Kennedy, Freedom From Fear, pp. 199-205.
 

FACTS: “[Roscoe Filburn] 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 part to poultry and livestock on the farm, some of  which is sold; to use some in making flour for home consumption, and to  keep the rest for the following seeding.”  Each year, the Secretary of  Agriculture would establish the “national acreage allotment” of wheat.   Local committees, such as the County Agricultural Conservation Committee  in Montgomery County, Ohio, would promulgate the acreage allotage for  each farmer in the county.  So, in the case of Mr. Filburn’s farm, the  Committee gave him a “wheat acreage allotment of 11.1 acres and a normal  yield of 20.1 bushels of wheat an acre.”  He received two notices of  his allotment but sowed 23 acres yielding 239 excess bushels of wheat  which subjected him to a penalty of 49 cents per bushel or $117.11.  Mr.  Filburn refused to pay the penalty or store the excess with the  Secretary; he was refused a “marketing card” which protects a buyer of  his wheat from liability under the penalty.  Mr. Filburn “sought a  declaratory judgment that the wheat marketing quota provisions of the  Act….were unconstitutional because not sustainable under the Commerce  Clause.” 

LOCAL/INDIRECT EFFECTS TESTS DISMISSED: Justice Robert Jackson, in addressing the Commerce Clause issue in the case, held U.S. v. Darby  controls except that the regulation in the present case dealt with  “production not intended in any part for commerce, but wholly for  consumption on the farm.” After all, Mr. Filburn used the wheat to feed  poultry and livestock on his farm, for use in his home and for his  future seed.  The Act controls the production of the wheat, whether or  not said wheat was intended for sale.  Filburn’s attorneys argued the  old, and recently discredited, argument that production and  manufacturing were local matters with only an indirect effect upon  interstate commerce.  These old arguments he dismissed by engaging in an  overview of the Supreme Court’s Commerce Clause jurisprudence over the  last century and concluded “questions of the power of Congress are not  to be decided by reference to…nomenclature such as “production” and  “indirect” and foreclose consideration of the actual effects of the  activity in question upon interstate commerce.”

THE SUPREME COURT’S COMMERCE CLAUSE JURISPRUDENCE:  Justice Jackson begins with the approach by Chief Justice Marshall in Gibbons v. Ogden  which he summarizes to hold “effective restraints on [Congress’  exercise of commerce clause power] must proceed from political, rather  than judicial, processes.”  The Commerce Clause for one hundred years  after Gibbons dealt “almost entirely with the permissibility of state  activity which it was claimed discriminated against or burdened  interstate commerce.”  These are the dormant (or negative) Commerce  Clause cases which prevented states from enacting laws burdening  interstate commerce (usually to discriminate against other states and  give preference for residents of their own states.)  Jackson summarizes  the approaches in U.S. V. E.C. Knight Co., Swift & Co. v. U.S. and the Shreveport Rate Cases  to reach a realistic conclusion upon implementing Congressional power  under the Commerce Clause “questions of federal power cannot be decided  simply by finding the activity in question to be “production,” nor can  consideration of its economic effects be foreclosed by calling them  “indirect.”  

THE SUBSTANTIAL EFFECTS TEST: After  dismissing the ‘production,’ ‘consumption’ or ‘marketing’  distinctions  for the purposes of determining whether federal power could be  exercised, what test did Justice Jackson apply?  Ultimately, even local  activity could be regulated by Congress under the Commerce Clause power  “if it exerts a substantial economic effect on interstate commerce”  regardless of whether that effect was defined as direct or indirect—a  distinction that was no longer relevant.  

THE AGGREGATION THEORY:   Having dismissed all of the prior tests and distinctions (the local  activity test, manufacturing/production vs. commerce distinction and the  direct vs. indirect test) and replacing them with the substantial  effects test, the last issue was constitutionalizing the  regulation of  intrastate activity—not just intrastate, but activity taking place  wholly on one farm.  For this, Justice Jackson argued something that has  since been labeled the aggregation theory: “That [Filburn’s] own  contributions to the demand for wheat may be trivial itself is not  enough to remove him from the scope of federal regulation where, as  here, his contribution, taken together with that of many others  similarly situated, is far from trivial.”  Simply, if all the farmers in  America grew wheat for their own personal use then that would have a  substantial effect on interstate commerce.    

THE SIGNIFICANCE OF THE CASE: Wickard v. Filburn has been identified as “the high-water mark of the New Deal’s constitutional revolution.” (Jim Chen, Filburn’s Legacy).   Chief Justice Rehnquist saw the decision as “perhaps the most far  reaching example of Commerce Clause authority over interstate  activity.”  US v. Lopez 514 US 549, at 560 (1995).  However,  Supreme Court historian David Currie sees the Wickard decision merely as  the fallout from the decisions from the Constitutional Revolution of  1937:  “Wickard v. Filburn permitted Congress to limit the wheat a  farmer grew for his own consumption on the ground that what he could  not grow he might buy from another state.  But that was only to write  the epitaph; constitutional federalism had died in 1937.”  David Currie, The Constitution in the Supreme Court: 1888-1986.  p. 238. 

 The  Civil Rights Act of 1964 was not the first Civil Rights Act in  America…but it was the first to have any real teeth (after  Reconstruction) and a significant impact on American life.  The  Fourteenth Amendment’s Equal Protection Clause gave Congress the power  over public accommodations but without state action, the discrimination  of private businesses could not be controlled by the Fourteenth  Amendment.  Thus, the Commerce Clause, after displaying its mighty  powers during the New Deal, was used as an enabling clause to fight  discrimination by formerly untouchable private enterprises.  Of course,  the segregationists did not go down without a fight….and in the process  they gave us the most famous motel and  barbecue joint in constitutional  history… 

 379 US 241 (1964)

FACTS:  Moreton Rolleston, Jr., owns the Heart of Atlanta Motel, a 216 room  motel in downtown Atlanta located near the interstate highway.  The  motel advertises in the national media, including national magazines and  on fifty billboards in the state: “approximately 75% of its registered  guests are from out of state.”  The motel does not rent rooms to  African-Americans.  After decades of trying to pass a meaningful bill to  protect the rights of minorities, the Civil Rights Act of 1964 was  signed into law by President Lyndon Johnson on July 2, 1964.  Two hours  and ten minutes after it was signed, Mr. Rolleston, who was also an  attorney, brought an action in District Court alleging the Heart of  Atlanta Motel would continue to discriminate against African-Americans.   He challenged the constitutionality of the public accommodations clause  of Title II of the Act which states:

“All  persons shall be entitled to the full and equal enjoyment of the goods,  services, facilities, privileges, advantage and accommodations of any  place of public accommodation….without discrimination or segregation on  the ground of race, color, religion, or national origin.”

The District Court held the Act constitutional and enjoined the Motel from refusing to accommodate African-Americans. 

DISCRIMINATION IN INTERSTATE TRAVEL:  Justice Tom Clark, cited congressional hearings that were “replete with  evidence of the burdens that discrimination by race or color places  upon interstate commerce,” and emphasized the “increasing mobil[ity]” of  Americans.   The discrimination which impacted interstate travel  throughout the nation hurt the quality and thereby  decreased the  quantity of travel for African-Americans, who frequently chose not to  travel, rather than have doubt over accommodations.  

THE POWER OF CONGRESS OVER INTERSTATE TRAVEL:  Justice Clark then looked into “the meaning of the Commerce Clause” to  determine whether Congress could do anything about these impediments to  interstate travel of African-Americans.  Citing extensively from Gibbons v. Ogden, Clark concludes Congress has the power to regulate “commerce which concerns more States than one.”  Citing the Passenger Cases from 1849, Clark establishes that commerce includes the travel of persons.  In support, he additionally cited Hoke v. U.S. 227 US 308 (1913) and Caminetti v. US  242 US 470 (1917) which dealt with regulating commerce by outlawing  persons moving in interstate commerce for immoral purposes (either  prostitution or non-commercial consensual sex).  Clark also cited a  number of cases where Congress extended its power over interstate  commerce to regulate “gambling…to criminal enterprises…to deceptive  practices in the sale of products…to fraudulent security transactions…to  misbranding of drugs…to wages and hours…to members of labor unions…to  crop control…(the last three reference Darby, Jones & Laughlin and Wickard.”   (See the full list of topics of congressional regulation of commerce,  below).  Thus, the history of Congress regulating to prevent moral  wrongs, constitutionally, is well-established with a multitude of  examples.  

SUBSTANTIAL EFFECTS TEST AND REGULATING LOCAL ACTIVITY: This  battle had already been fought, and won by Congress during the later  parts of the New Deal.  The “local incidents” of commerce, per Justice  Clark, could be controlled by Congress; “the power of Congress to  promote interstate commerce also includes…local activities in both the  States of origin and destination, which might have a substantial and  harmful effect upon that commerce.”  The “substantial effect” was  established based on the congressional hearings identified prior by  Clark.

DUE PROCESS ARGUMENT DEFEATED BY RATIONAL BASIS:  Lastly, Clark dismissed the argument that the Heart of Atlanta Motel,  Inc. was denied property without due process of law based on the power  congress has to legislate in the realm of economic activity, as long as  it has a rational basis to do so.  Clark makes an economic point here as  well:

“It is  doubtful if, in the long run, appellant will suffer economic loss as a  result of the Act. Experience is to the contrary where discrimination is  completely obliterated as to all public accommodations. But whether  this be true or not is of no consequence, since this Court has  specifically held that the fact that a "member of the class which is  regulated may suffer economic losses not shared by others . . . has  never been a barrier" to such legislation.”

THE SIGNIFICANCE OF THE CASE:  The  Heart of Atlanta Motel decision is the logical descendant of the New  Deal line of cases after the switch in time.  Clearly, it sanctions the  use of the Commerce Clause by Congress as a powerful weapon against  discrimination.

CONGRESS LEGISLATING AGAINST MORAL WRONGS UNDER COMMERCE: Justice Tom Clark cited a litany of evils Congress has regulated, that the Supreme Court has held constitutional:

“The  same interest in protecting interstate commerce which led Congress to  deal with segregation in interstate carriers and the white slave traffic  has prompted it to extend the exercise of its power to gambling, Lottery Case, 188 U.S. 321 (1903); to criminal enterprises, Brooks v. United States, 267 U.S. 432 (1925); to deceptive practices in the sale of products, Federal Trade Comm'n v. Mandel Bros., Inc., 359 U.S. 385 (1959); to fraudulent security transactions, Securities & Exchange Comm'n v. Ralston Purina Co., 346 U.S. 119 (1953); to misbranding of drugs, Weeks v. United States, 245 U.S. 618 (1918); to wages and hours, United States v. Darby, 312 U.S. 100 (1941); to members of labor unions, NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937); to crop control, Wickard v. Filburn, 317 U.S. 111 (1942); to discrimination against shippers, United States v. Baltimore & Ohio R. Co., 333 U.S. 169 (1948); to the protection of small business from injurious price-cutting, Moore v. Mead's Fine Bread Co., 348 U.S. 115 (1954); to resale price maintenance, Hudson Distributors, Inc. v. Eli Lilly & Co., 377 U.S. 386 (1964), Schwegmann v. Calvert Distillers Corp., 341 U.S. 384 (1951); to professional football, Radovich v. National Football League, 352 U.S. 445 (1957), and to racial discrimination by owners and managers of terminal restaurants, Boynton v. Virginia, 364 U.S. 454 (1960).”

MORETON ROLLESTON, JR.: ATTORNEY AND PROPRIETOR- THE HEART OF ATLANTA MOTEL: Hotelier-Attorney Moreton Rolleston (below) argued before the U.S. Supreme Court in Heart of Atlanta Motel, Inc. v. US.   The Heart of Atlanta Motel, located at 255 Corteland Avenue, NE in  Downtown, Atlanta was described in an Associated Press article published  at the time as a “plush, $3 million establishment” where rooms cost  anywhere from $12 to $16 per night.  According to an article in the New  York Times published after the decision was handed down, the motel, one  of the biggest in Georgia, opened in 1956 and was expanded to 216 rooms  in 1958.  Mr. Rolleston, upon learning of the Supreme Court’s ruling,  stated: “[The decision] makes possible a socialistic state.  This is a  sad day for the cause of individual freedom.”  

From Socialistic State Foreseen, The New York Times, December 15, 1964, Page 48. 
See also, Atlantan Decries Accommodations Ruling, A.P. retrieved in  articlehttp://www.newsinhistory.com/blog/supreme-court-ruling-upholds-1964-civil-rights-act
 

WHAT BECAME OF MR. ROLLESTON? Mr. Rolleston has remained  controversial throughout the years.  In 2003, Mr. Rolleston was sued for  malpractice over a real estate dispute.  It led to a $5.4 million  ruling against him.  He attempted to avoid the judgment by moving all of  his assets in to a trust, but this failed.  In 2003, his family’s 17  acre estate in Buckhead, Georgia was auctioned off to  writer-actor-director Tyler Perry.  Perry demolished the Rolleston home  of 40 years to make room for a mansion.  Rolleston thereafter brought  three lawsuits against Perry to attempt to reclaim his property.  Mr.  Rolleston’s harassment of Perry led to him spending time in jail and,  ultimately, disbarment in 2007 at the age of 89.  "Due to Rolleston's  continuous and flagrant disregard for the ethical standards imposed upon  members of the Bar, this Court must employ its inherent authority over  the practice of law in this State to order that Rolleston be disbarred,"  the order read.

From D. L. Bennet, Attorney Disbarred over Turf War Ending with Entertainer, The Atlanta Journal-Constitution, October 10, 2007.

WHAT BECAME OF THE HEART OF ATLANTA MOTEL? Mr.  Rolleston sold the motel, “the swankiest place to stay between New York  and Miami,” in the late 1970s for $11.1 million.  The constitutionally  historic motel was torn down in 1973 and replaced with the Downtown  Atlanta Hilton Hotel.  From D. L. Bennet, House of Pain: Property  Dispute Creates Drama Worthy of Madea, The Atlanta Journal-Constitution,  September 26, 2007.
 

379 US 294 (1964)

FACTS:   “Ollie’s Barbecue is a family owned restaurant in Birmingham Alabama,  specializing in barbecued meats and homemade pies, with seating capacity  of 220 customers.  It is located on a state highway 11 blocks from an  interstate [highway] and a somewhat greater distance from railroad and  bus stations.  The restaurant caters to a family and white-collar trade  with a take-out service for Negroes.  It employs 36 persons, two-thirds  of whom are Negroes.  In the 12 months preceding the passage of the  [Civil Rights] Act, the restaurant purchased locally approximately  $150,000 worth of food, $69,683 or 46% of which was meat that it bought  from a local supplier who had procured it from outside the State. The  District Court expressly found that a substantial portion of the food  served in the restaurant had moved in interstate commerce. The  restaurant has refused to serve Negroes in its dining accommodations  since its original opening in 1927, and, since July 2, 1964, it has been  operating in violation of the Act. The court below concluded that, if  it were required to serve Negroes, it would lose a substantial amount of  business.”  The owners of Ollie’s Barbecue sought and secured an  injunction against the government from enforcing the Civil Rights Act of  1964 and requiring the restaurant to serve African-Americans.

THE LITIGANTS:  Ollie McClung, Sr. was the owner (and namesake) of Ollie’s Barbecue.   Nicholas Katzenbach was President Lyndon Johnson’s Attorney General.

WHAT GIVES CONGRESS THE AUTHORITY TO ENACT THE CIVIL RIGHTS ACT?   As a quick aside, Justice Tom Clark, agrees with the District Court  and  refuses to apply the Fourteenth Amendment because Ollie’s Barbecue  is not an instrumentality of the state. Thus, he concludes the issue in  the case is whether Congress under the Commerce Clause has the power to  regulate “a restaurant annually receiving about $70,000 worth of food  which has moved in commerce.”

DISCRIMINATION IN INTERSTATE TRAVEL (PART 2): This unanimous decision, argued and decided the same day as Heart of Atlanta Motel, Inc., was also drafted by Justice Tom Clark.  As in Heart of Atlanta,  he cites congressional hearings establishing reduced spending by  African-Americans in areas where discrimination in public accommodations  was widespread.  Additionally, discrimination discouraged  African-Americans from traveling for fear of finding clean and safe  places to eat while on a trip.  Thus restaurants in areas practicing  discrimination sold less interstate goods and travel in these areas was  “obstructed.”  Clearly, discrimination by restaurants impacts interstate  travel.

THE AGGREGATION OF DISCRIMINATION BY RESTAURANTS:  It could be argued that any impact Ollie’s Barbecue has on interstate  commerce is negligible.  Although “viewed in isolation, the volume of  food purchased by Ollie’s Barbecue from sources supplied from out of  state was insignificant” Clark cites the aggregation theory from Wickard v. Filburn   to conclude that the restaurant’s “contribution, taken together with  that of many others similarly situated, is far from trivial.”

THE POWER OF CONGRESS TO REGULATE LOCAL ACTIVITIES:  It could also be argued that the business of a restaurant is purely local.  Clark resorts, again, to the argument in Wickard v. Filburn  that even local activity  can be regulated by Congress “if it exerts a  substantial economic effect on interstate commerce.”  The question as to  the substantial economic effect on interstate commerce, according to  Justice Clark, is to be answered by the Congress.  And, provided “the  legislators, in light of facts and testimony before them, have a  rational basis for finding a chosen regulatory scheme necessary to the  protection of commerce, our investigation is at an end.”  Thus, the  Supreme Court defers to the wisdom of Congress, as is the rule under the  rational basis test with economic regulation.  With little analysis,  Clark concluded Congress “had a rational basis for finding that racial  discrimination in restaurants had a direct and adverse effect on the  free flow of interstate commerce.”

OLLIE’S BARBECUE:  Founded by James Ollie McClung in 1926, Ollie’s Barbecue was a popular  downtown Birmingham eatery for over 70 years.  Ollie McClung Sr. (son of  the founder) brought the original lawsuit along with his son.  At the  time, Ollie’s Barbecue was the last restaurant to refuse to comply with  the Civil Rights Act of 1964 and continue to serve African-Americans  takeout only. (The restaurant was located in a predominantly  African-American neighborhood.)  From an interview prior to the decision  published in the New York Times, Mr. McClung stated: “The Lord gives  people a choice.  And I feel that the people in this country should have  the same choice and control over their business.”  After the decision  was handed down, Mr. McClung agreed to comply with “this edict of the  Supreme Court.”  After integrating the restaurant’s dining area, no  incidents were reported.

Famous  for its sauce, it moved from the original location on Greensprings  Highway in 1999 to the suburbs of Birmingham and closed permanently in  2001.  The last owner, Ollie W. McClung, Jr., was the grandson of the  founder.  He closed shop because business never picked up after the  move.  However, the sauce can still be purchased in supermarkets and on  the internet ($26.04 for a small bottle, includes shipping). 
 

From Birmingham Cafe Bows to Decision, New York Times, December 17, 1964, p. 46 and the Birmingham Business Journal, Ollie’s BBQ closes, but the sauce will live on, September 23, 2001.  

To purchase Ollie’s Barbecue sauce see the link at  http://www.pilleteri.com/o_bbq.html

“Ollie's  BBQ Sauce: Since 1926 this spicy, vinegar-based sauce has been the  perfect compliment to Ollie's delicious open-pit, hickory flavored  barbecue. Thinner than tomato based sauces, it is best used when cooking  at home as a marinade or to add a lively zing to your other favorite  sauces. No preservatives here. The sauce's natural ingredients act as  its own preservative giving it an unlimited shelf life. But you won't  have to worry about shelf life - you will like it so much, you will run  out of it soon and be hungry for more.”

514 U.S. 549 (1995)

QUICK OVERVIEW: The constitutional world awaited the Court's decision in U.S. v. Lopez...what  many believed would be the first decision to say the Congress  overstepped it's Commerce Clause power, based on the configuration of  the court and the extent to which the Commerce Clause was stretched.   The court's pendulum may have swung its farthest right with the Lopez  decision.
 

FACTS: On March 10, 1992, Alphonso Lopez, Jr.,  a 12th grade student at Edison High School in San Antonio, Texas,  carried a concealed .38 caliber (with five bullets) handgun into high  school.  He was charged with violating the Gun Free School Zones Act of  1990, a law passed by Congress making it a federal crime to knowingly  possess a firearm in a school zone.  He was convicted at District Court;  on appeal to the Court of Appeals for the Fifth Circuit, he argued  successfully that the Act exceeded Congress’ Commerce Clause power.  

HISTORY OF THE COMMERCE CLAUSE IN THE SUPREME COURT: Chief Justice Rehnquist begins his analysis of the Commerce Clause, logically, with Gibbons v. Ogden  which confirmed a comprehensive Congressional power to regulate  Commerce with limitations that respect the sovereignty of the states.   Summarizing the next one hundred years, Rehnquist concludes “the Court's  Commerce Clause decisions dealt but rarely with the extent of Congress'  power, and almost entirely with the Commerce Clause as a limit on state  legislation that discriminated against interstate commerce.”  The Chief  Justice sites the conclusion in Kidd v. Pearson 128 US 1(1888)  that Congress shall not regulate “purely domestic commerce” defined in  that case as commerce “carried on between man and man within a State.”   However, with passage of the Interstate Commerce Act, the Commerce  Clause expanded from acting as a negative on state laws impacting  commerce (the Dormant Commerce Clause approach) to empowering the  congress.  

The  Chief Justice then walks through the seminal Commerce Clause cases.  He  summarizes the distinctions for manufacturing and production (E.C. Knight and Carter), the early exception for regulating intrastate commerce when “so mingled” with interstate commerce (Shreveport Rate Case), and the direct vs. indirect test (Schecter).   He then highlights the shift in approach during the New Deal era, where  the focus on the effects of local behavior on interstate commerce  became “necessarily one of degree.”  (NLRB v. Jones and Laughlin).  The Chief Justice, concluding on the New Deal cases and the nature of business in the 20th century , stated:

“Jones & Laughlin Steel, Darby, and Wickard  ushered in an era of Commerce Clause jurisprudence that greatly  expanded the previously defined authority of Congress under that Clause.  In part, this was a recognition of the great changes that had occurred  in the way business was carried on in this country. Enterprises that had  once been local or at most regional in nature had become national in  scope. But the doctrinal change also reflected a view that earlier  Commerce Clause cases artificially had constrained the authority of  Congress to regulate interstate commerce.” 

THE “OUTER LIMITS” OF THE COMMERCE CLAUSE: In  a statement indicating the direction Rehnquist sees the Commerce Clause  taking at the close of the 20th Century, he notes: “even these modern  era precedents which have expanded congressional power under the  Commerce Clause confirm that this power is subject to outer limits.”   These limits include respect for “our dual system of government” and a  rule that Congress should not attempt to regulate matters with “effects  upon interstate commerce so indirect and remote that to embrace  them…would effectually obliterate the distinction between what is  national and what is local and create a completely centralized  government.” (NLRB v. Jones and Laughlin 201 U.S., at 37).  To  respect the dual system of government, the rational basis analysis and  substantial economic effects test were applied from the New Deal  forward.  To stay within the bounds of what Congress may regulate,  properly, Rehnquist identifies “three broad categories” of activity that  fall under Congress’s commerce clause power: 

1. “Congress may regulate the use of the channels of interstate  commerce…[for example] to keep the channels…free from immoral and  injurious uses.” E.G. Darby v. U.S. and Heart of Atlanta Motel.
2. “Congress is empowered to regulate and protect the instrumentalities  of interstate commerce, or persons or things in interstate commerce,  even though the threat may come only from intrastate activities.”  E.G. Shreveport Rate Cases.
3. “[Congress may] regulate those activities having a substantial relation to interstate commerce.” E.G. NLRB v. Jones & Laughlin.

REGULATING NON-ECONOMIC ACTIVITY:   After quickly concluding that this regulations does not fall under  category one or two, Rehnquist looks to the “substantial relations  test.” Congress can regulate intrastate economic activity if “the  activity substantially affected interstate commerce.”  Obviously, the  activity must be commerce and, according to Chief Justice Rehnquist,  this statute “has nothing to do with ‘commerce’ or any sort of economic  activity.” The government argued, violent crimes affect the national  economy because of the increased insurance costs and the reduction in  travel caused by fear of crime.  (Also, firearms near a school threaten  the school environment which “will result in a less productive  citizenry.”)  To Rehnquist, this approach would lead to unlimited  federal power: “if we were to accept the Government’s arguments, we are  hard pressed to posit any activity by an individual that Congress is  without power to regulate.”  This approach could give Congress power  over “family law and direct regulation of education,” “child rearing”  and “every aspect of local schools.”  This matter is, simply, too great a  stretch to be regulated under the Commerce Clause:  “The possession of a  gun in a local school zone is in no sense an economic activity that  might, through repetition elsewhere, substantially affect any sort of  interstate commerce.”  Possession of a firearm by a “local student at a  local school” has no realistic connection with interstate commerce.   According to Rehnquist, to allow this regulation would create a general  federal police power similar to that possessed by the states and create  an enumerated power not enumerated in the Constitution.  Taking this  step means “there will never be a distinction between what is truly  national and what is truly local.”

BREYER’S DISSENT:   The principal dissent, by Justice Stephen Breyer, focused on the  “economic links” between “gun-related school violence and interstate  commerce” which he deemed to be “fairly obvious.”  Thereby, he concluded  the Congress had a rational basis to pass the law, based on the  substantial effect of crime in schools on interstate commerce.
 

SIGNIFICANCE OF THE CASE:  Lopez is the first decision in 60 years…since Carter  and the New Deal…to declare a law passed by Congress under the Commerce  Clause unconstitutional. As Constitutional scholars identified, “State  autonomy returned with a vengeance in United States v. Lopez.”   Rehnquist’s focus was on the “local” nature of the activity, reviving  the old local-national distinction, and put a “halt” to further  transforming the Commerce Clause into a federal police power. Applying Lopez to other federal police power laws, United States v. Morrison,  decided in 2000, invalidated the federal Violence Against Women Act as  an unconstitutional over-reach by Congress.  The decision applied  similar reason to Lopez, and the same five person majority.
 

 From Donald P. Kommers, et. al., American Constitutional Law, p. 331.
 

 545 U.S. 1 (2005)
 

FACTS: In 1996 California passed Proposition 215 which  became known as the Compassionate Use Act.  The law allowed “seriously  ill” Californians “access to marijuana for medical purposes.” Patients  and primary caregivers “who possess or cultivate marijuana for medical  purposes with the…approval of a physician” were exempt from criminal  prosecution.  Angel “Raich and Diane Monson are California residents who  suffer from a variety of serious medical conditions and have sought to  avail themselves of medical marijuana” under the act.  Board-certified  physicians have concluded that marijuana is the only effective treatment  for their conditions.  They have both been using marijuana on a daily  basis for a number of years.  Ceasing use would cause severe pain, and  perhaps death, according to their doctors.  Ms. Monson grows her own  marijuana, while Ms. Raich relies on caregivers to grow it.  On August  15, 2002, county sheriffs and federal Drug Enforcement Administration  (DEA) agents went to Monson’s home to investigate.  Although “the county  officials concluded that her use of marijuana was entirely lawful as a  matter of California law…federal agents seized and destroyed all six of  her cannabis plants” under the federal Controlled Substances Act. This  suit was brought challenging the constitutionality of that act.
 

THE COMMERCE CLAUSE BACKGROUND AND THE THREE GENERAL CATEGORIES:  To begin his analysis, Justice Stevens narrates the long 20th century  history of congressional laws regulating, taxing and criminalizing  certain drugs—marijuana being chief among those drugs deemed illicit.   Stevens then explains, in less detail than in Lopez, the history of the  Commerce Clause.  Similar to Lopez he identifies “the three general  categories” authorizing Congress’ Commerce Clause power—regulating the  channels of interstate commerce, the instrumentalities of interstate  commerce and intrastate matters that substantially affect interstate  commerce.
 

WICKARD AND REGULATING PURELY LOCAL ACTIVITY: Repeating a  general rule established from the New Deal era cases, Congress has the  power to regulate even “purely local activities” as long as they are  “part of an economic “class of activities” that have a substantial  effect on interstate commerce.”  Stevens points to Wickard as the most relevant in deciding the case at hand.  To him, Wickard  “establishes that Congress can regulate purely intrastate activity that  is not itself ‘commercial,’ in that it is not produced for sale”  provided Congress feels that failure to regulate local non-commercial  activity would “undercut regulation of the interstate market.”  Wickard and Gonzalez are most alike, to Stevens since both deal with “cultivating for home consumption, a fungible commodity.”  Stevens concludes:
 

“In both cases, the regulation is squarely within Congress’ commerce  power because production of the commodity meant for home consumption, be  it wheat or marijuana, has a substantial effect on supply and demand in  the national market for that commodity.”
 

In sum, Congress had a rational basis to conclude regulating home grown  marijuana would help in keeping all marijuana out of the channels of  commerce since it is impossible to differentiate between the local home  grown and interstate varieties.
 

DIFFERENTIATING LOPEZ: Stevens does this will little  effort. The law in Lopez did not deal with economic activities whereas  Gonzalez regulated an “economic, commercial activity.”
 

O’CONNOR’S DISSENT: Justice O’Connor’s dissent argues the  historic importance of federalism and state sovereignty:  “We enforce  the “outer limits” of Congress’ Commerce Clause authority not for their  own sake, but to protect historic spheres of state sovereignty from  excessive federal encroachment and thereby to maintain the distribution  of power fundamental to our federalist system of government.”
 

Justice O’Connor explains to modern readers the reason for federalism,  citing an oft-quoted Brandeis dissent:  “One of federalism’s chief  virtues, of course, is that it promotes innovation by allowing for the  possibility that “a single courageous State may, if its citizens choose,  serve as a laboratory; and try novel social and economic experiments  without risk to the rest of the country.” New State Ice Co. v. Liebmann, 285 U.S. 262, 311 (1932) (Brandeis, J., dissenting).
 

To O’Connor this “States as laboratories” concept is what is preserved  under federalism—and the experimentation that thrives at the state level  can bring beneficial changes at the national level.  In an interesting  approach to Wickard, O’Connor points out that even the  Agricultural Adjustment Act did not attempt to regulate “small-scale,  noncommercial wheat farming….[since] Congress provided an exemption  within the AAA for small producers.”  Congress may, of course, regulate  small quantities of a product; but Wickard cannot stand as  authority “that small-scale production of commodities is always  economic, and automatically within Congress’ reach.”  Her conclusion:  “There is simply no evidence that homegrown medicinal marijuana users  constitute, in the aggregate, a sizable enough class to have a  discernible, let alone substantial, impact on the national illicit drug  market.”

SIGNIFICANCE OF THE CASE:  Gonzalez v. Raich’s expansive view of the Commerce Clause certainly threw a bucket of cold water on the belief that Lopez  represented a pendulum shift. The two decisions set the stage (and  demarcate the opposing sides in the debate) for the Supreme Court to  rule on the constitutionality of the controversial National Health Care  laws, scheduled for oral argument in March 2012.  

 by Adam Sasiadek, Esq.

As we know, the U.S. Constitution is the document that defines the  powers of the federal government.   However, it also affects the powers  of the state governments, including their power to enact laws affecting  health, safety, and others interests, if those laws also have an impact  on interstate commerce.  The “dormant commerce clause” of the  Constitution limits state power over interstate commerce.  The dormant  commerce clause is implicated when:
•    A state enacts a law that regulates, directly or indirectly, interstate commerce; and
•    Congress has not legislated on the matter that is regulated by the state law.
However, this doctrine is not based on the text of the Constitution.   You will not find it spelled-out in any of the seven articles of that  document, or in its 27 amendments.  Article I, Section 8, of the  Constitution only addresses the federal government’s power over  interstate commerce: “The Congress shall have Power…To regulate Commerce  with foreign nations, and among the several States, and with the Indian  Tribes.”  Rather, the dormant commerce clause is implied from the text  of the Constitution and the historical setting in which it was framed.  
 

The Articles of Confederation was our country’s governing document  during and immediately after the American Revolution.  After the  thirteen colonies won their independence from the British, they quickly  enacted laws that favored local interests over those of other the  states.  The Framers of the Constitution sought an arrangement that  would put an end to this economic warfare.  In H.P. Hood & Sons v. Du Mond,  336 U.S. 525 (1949), Justice Robert H. Jackson, who served on the Court  from 1941 to 1954, explained with great eloquence how the  Constitutional Convention of 1787 was driven by the need for economic  unity among the states, above all other issues:  
 

“The sole purpose for which Virginia initiated the movement which  ultimately produced the Constitution was ‘to take into consideration the  trade of the United States; to examine the relative situations and  trade of the said states; to consider how far a uniform system in their  commercial regulation may be necessary to their common interest and  their permanent harmony.’…The desire of the Forefathers to federalize  regulation of foreign and interstate commerce stands in sharp contrast  to their jealous preservation of power over their internal affairs.  No  other federal power was so universally assumed to be necessary, no other  state power so readily relinquished.”
 

One of the primary purposes for replacing the Articles of Confederation  with the Constitution was to ensure that a system of open trade existed  between every state of the country.  This would be accomplished by  transferring some of the states’ power over commerce to the federal  government.  As a result, the states are now prohibited from regulating  interstate commerce in certain ways.    
 

The Dormant commerce clause has been most frequently implicated by state regulation in three areas:
•    The sale and production of agricultural goods.
•    Transportation, especially regulations applying to trucking and railroads.
•    Waste disposal and related public health issues.
 

Congress also has a role to play in the dormant commerce clause  analysis.  As was stated above, the dormant commerce clause only applies  to state laws that do not have a federal counterpart.  But Congress may  preempt a particular state regulation by passing a law that regulates  the same matters, and it may also expressly permit the states to  regulate interstate commerce in ways that the dormant commerce clause  would not allow.
 

The dormant commerce clause prohibits states from advancing “their own  commercial interests by curtailing the movement of articles of commerce,  either into or out of the state,” but it does generally support “their  right to impose even burdensome regulations in the interest of local  health and safety.” (H.P. Hood & Sons, at 535.)  More specifically,  there are four categories of state legislation affected by the dormant  commerce clause:
 

I.  Laws that openly discriminate against interstate commerce.
II.  Laws that do not openly discriminate against interstate commerce, but place an “incidental burden” on it.
III.  Laws that are facially neutral but have discriminatory effects on interstate commerce.
IV.  Laws that make a state a “market participant.”
 

There are two standards of review that the courts apply to these laws.   Laws in the first category – those that are facially discriminatory –  are presumed invalid unless the state can show that they serve a  legitimate purpose that cannot be achieved in any other way.  This  standard of review is referred to as “strict scrutiny.”  The Supreme  Court applies a balancing test to laws in the second category: the state  law is presumed constitutionally valid and the challenger must show  that the burden it places on interstate commerce far outweigh the local  benefits it provides.       
 

Laws in the third category are subjected to either standard of review,  based on the discriminatory purpose and effect of the law in question  (the cases discussed below will illustrate how the Supreme Court has  grappled with laws in this category).  Finally, when a state  participates in the market economy, buying or selling goods or services  as an individual or business entity would, it is exempt from the dormant  commerce clause.