Schechter v. US (1935) is the 61st landmark Supreme Court case, the 25th in the Economics module, featured in the KTB Prep American Government and Civics series designed to acquaint users with the origins, concepts, organizations, and policies of the United States government and political system. The goal is greater familiarization with the rights and obligations of citizenship at the local, state, national, and global levels and the history of our nation as a democracy. While there is overlap, these landmark cases are separated into cases addressing:

• Courts
• Foreign Policy
• Family
• Science & Technology
• Environment
• Public Safety
• Religion
• Death Penalty
• Healthcare
• Speech, Press, and Protest
• Elections
• Economics
• Criminal Justice
• Education
• Politics, Society, Freedom, and Equality

The Supreme Court

The Supreme Court is the highest court in the United States. Article III of the U.S. Constitution created the Supreme Court and authorized Congress to pass laws establishing a system of lower courts. The Constitution elaborated neither the exact powers and prerogatives of the Supreme Court nor the organization of the Judicial Branch as a whole. Thus, it has been left to Congress and to the Justices of the Court through their decisions to develop the Federal Judiciary and a body of Federal law.

The number of Justices on the Supreme Court changed six times before settling at the present total of nine in 1869. Since the formation of the Court in 1790, there have been only 17 Chief Justices* and 102 Associate Justices, with Justices serving for an average of 16 years. On average a new Justice joins the Court almost every two years.

The Supreme Court of the United States hears about 100 to 150 appeals of the more than 7,000 cases it is asked to review every year. That means the decisions made by the 12 Circuit Courts of Appeals across the country and the Federal Circuit Court are the last word in thousands of cases.

Court of Appeals

In the federal court system’s present form, 94 district level trial courts and 13 courts of appeals sit below the Supreme Court. The 94 federal judicial districts are organized into 12 regional circuits, each of which has a court of appeals. The appellate court’s task is to determine whether or not the law was applied correctly in the trial court. Appeals courts consist of three judges and do not use a jury.

The appellate courts do not retry cases or hear new evidence. They do not hear witnesses testify. There is no jury. Appellate courts review the procedures and the decisions in the trial court to make sure that the proceedings were fair and that the proper law was applied correctly.

A court of appeals hears challenges to district court decisions from courts located within its circuit, as well as appeals from decisions of federal administrative agencies. In addition, the Court of Appeals for the Federal Circuit has nationwide jurisdiction to hear appeals in specialized cases, such as those involving patent laws, and cases decided by the U.S. Court of International Trade and the U.S. Court of Federal Claims.

District Courts

The nation’s 94 trial courts are called U.S. District Courts. At a trial in a U.S. District Court, witnesses give testimony and a judge or jury decides who is guilty or not guilty — or who is liable or not liable. District courts resolve disputes by determining the facts and applying legal principles to decide who is right.

Trial courts include the district judge who tries the case and a jury that decides the case. Magistrate judges assist district judges in preparing cases for trial. They may also conduct trials in misdemeanor cases.

There is at least one district court in each state, and the District of Columbia. Each district includes a U.S. bankruptcy court as a unit of the district court.

Bankruptcy Courts

Federal courts have exclusive jurisdiction over bankruptcy cases involving personal, business, or farm bankruptcy. This means a bankruptcy case cannot be filed in state court. Bankruptcy Appellate Panels (BAPs) are 3-judge panels authorized to hear appeals of bankruptcy court decisions. These panels are a unit of the federal courts of appeals, and must be established by that circuit. Five circuits have established panels: First Circuit, Sixth Circuit, Eighth Circuit, Ninth Circuit, and Tenth Circuit.

Schechter v. US (1935)

Schechter Facts:

Under the National Industrial Recovery Act, Congress allowed the President to regulate certain industries by distributing authority to develop codes of conduct among business groups and boards in those industries. The Act did not provide standards for the President or the business groups in implementing its objectives, and he could choose to give some codes the force of law. These included price and wage fixing, as well as requirements regarding the sale of whole chickens, including unhealthy ones.

The government claimed the Schechter brothers sold sick poultry, which has led to the case becoming known as “the sick chicken case”. When Schechter Poultry Corp. was indicted for violating a business code governing the poultry industry in New York City, it argued that the law was an unconstitutional violation of the non-delegation doctrine.

There were originally sixty charges against Schechter Poultry, which were reduced to eighteen charges plus charges of conspiracy by the time the case was heard by the U. S. Supreme Court. Among the eighteen charges against Schechter Poultry were “the sale to a butcher of an unfit chicken” and the sale of two uninspected chickens. Ten charges were for violating codes requiring “straight killing”. Straight killing prohibited customers from selecting the chickens they wanted; instead a customer had to place his hand in the coop and select the first chicken that came to hand.

Schechter Legal Questions and Answers

Q: Did Congress unconstitutionally delegate legislative power to the President by giving him power to regulate certain industries without also providing guiding standards?

A: Yes. The Act was “without precedent” and was an unconstitutional delegation of legislative authority

Schechter Conclusion

Unanimous decision ruling Section 3 of the National Industrial Recovery Act was an unconstitutional delegation of legislative power to the Executive, and was not a valid exercise of congressional Commerce Clause power. United States Court of Appeals for the Second Circuit affirmed in part and reversed in part.

The codes violated the constitutional separation of powers as an impermissible delegation of legislative power to the executive branch. The NIRA provisions were in excess of congressional power under the Commerce Clause.

Congress can lawfully regulate direct effects on interstate commerce, but indirect effects are purely matters of state law. Though the raising and sale of poultry was an interstate industry, the “stream of interstate commerce” stopped in this case—Schechter’s slaughterhouses chickens were sold exclusively to intrastate buyers. Any interstate effect of Schechter was indirect, and therefore beyond federal reach.

The President cannot be allowed to have unbridled control to make whatever laws he believes to be necessary to achieve a certain goal. The law did not establish rules or standards to evaluate industrial activity, meaning Congress failed to provide the necessary guidelines for the implementation of this functionally legislative process.

The Court used the NIRA invalidation as an opportunity to affirm constitutional limits on congressional power, for fear that it could otherwise reach virtually anything that could be said to “affect” interstate commerce and intrude on many areas of legitimate state power. The court ruled that the law violated the Tenth Amendment.

A spectrum approach to direct and indirect effects is preferable to a strict dichotomy. In this case, Schechter was simply too small a player to be relevant to interstate commerce.

This traditional reading of the Commerce Clause was later disavowed by the Court, which after threats from Roosevelt began to read congressional power more expansively in this area, in cases such as NLRB v. Jones & Laughlin Steel Corp (1937). However, more recent cases such as United States v. Lopez (1995) perhaps signal a growing inclination in the Court to once again affirm limits on its scope. In a unanimous 2011 decision, Bond v. United States (2011), the Supreme Court cited Schechter as a precedent.

Next Case: Gold Clause Cases (1935)

Previous Case: Nebbia v New York (1934)

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