Federalism – The Structure of Government



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Federalism – The Structure of Government


  1. Judicial Review & Constitutional Interpretation

    1. Phillip Bobbitt, Modalities of Constitutional Interpretation – the ways in which legal propositions are characterized as true from a constitutional point of view.

      1. Historical – relying on the intentions of the framers and ratifiers of the Constitution.

        1. Did the framers intend to give Congress the power to establish a national bank? McCulloch v. Maryland.

        2. Did they intend to include blacks as “citizens?” Dred Scott v. Stanford.

        3. The benefits of this approach:

          1. Constrains judges  they cannot insert their own policy preferences

          2. Empowers democracy  change must be funneled through the democratic Amendment process

        4. Problems of the approach:

          1. Framers had diverging views

          2. Framers did not want their notes from the constitutional convention made public  they didn’t want us to rely on their reasoning

          3. Pragmatically, this approach prevents new solutions from being implemented as circumstances change

          4. Framers are dead  why should their view be so influential?

      2. Textual – looking into the meaning of the words of the Constitution alone, as they would be interpreted by the average contemporary “man on the street.”

        1. Does the text of the 4th Amendment prevent wiretapping without a warrant? Taft said no  later overturned as too narrow of a holding.

        2. The benefits of this approach:

          1. Focuses the inquiry into a verifiable source of interpretation

          2. Sets boundaries for the use of power.

        3. The problems with textualism:

          1. Beauty is in the eye of the beholder – people have different interpretations of what the same line of text will mean. Meaning is inserted by the reader, not by the writer

          2. The Constitution is a sparse document – not much text to look at.

      3. Structural – inferring rules from the relationships that the Constitution mandates among the structures it sets up

        1. Can the court issue a subpoena for the President’s papers, possibly interfering with the relationship between the judiciary and the executive?

        2. The Federal Constitution guarantees the right to vote, but gives Congress no explicit power to enforce that right? Does the structure provide such authority?

        3. Bobbitt sets out three steps to this kind of interpretation:

          1. Make an uncontroversial statement about the constitutional structure (We have a government of enumerated powers)

          2. Infer a relationship from this structure (This means that Congress cannot pass legislation that does not draw legitimacy from one of its enumerated powers & the Judiciary must police this power)

          3. Make a factual assertion about the world (If we don’t enforce this enumeration, federalism will be meaningless, and we expose ourselves to the danger of tyranny)

          4. Draw a conclusion that provides the rule in this particular case (The type of law passed here does not derive legitimacy from an enumerate power).

        4. Benefits of this approach:

          1. It tires to infer an overarching form of government to solve problems not directly addressed by the text

          2. It can be used to enforce the intent of the framers

        5. Problems with this approach:

          1. It requires a great deal of inference, putting lots of power in the hands of judges.

      4. Doctrinal – applying rules generated by precedent

        1. Establishment Clause has been intensely litigated – how should the precedents be followed in future situations?

        2. Benefits of the approach:

          1. Actors can know what the result of their action is ex-ante

          2. Provides actors with notice & stability

        3. Problems with this approach:

          1. Some decisions are wrong – should we keep following a bad rule & for how long?

          2. It may lead to outcomes that are convoluted and make little sense (multi-prong tests) in light of the problem.

      5. Ethical – deriving rules from those moral commitments of the American ethos that are reflected in the Constitution

        1. In America, the fundamental constitutional ethos is the idea of a limited government, favoring large amounts of private sector authority.

        2. Can the government sterilize individuals – the constitution does not prevent such actions?

        3. Benefits of the approach:

          1. The constitution is fundamental law. It is an expression of the values of our society and must be interpreted as such.

        4. Problems with this approach:

          1. Will this approach fail to protect minority rights?

          2. Will it allow judges to make ethical judgments?

      6. Prudential – seeking to balance the costs and benefits of a particular rule; most often evoked in times of emergency (Great Depression & War).

        1. Does MN’s ban on foreclosure actions during the Depression violate the Contracts Clause?

        2. Benefits of the approach:

          1. It responds to practical needs  society can deal with problems as they arise

          2. It lays out the different Constitutional interests at steak openly & judges their importance based upon the factual context.

        3. Problems with this approach:

          1. Precedent laid down within a crisis context will be problematic once that crisis is overcome

          2. Gives judges a lot of discretion – they get to weigh the costs & benefits

          3. It gives the lower courts little guidance – these decisions tend to be very particularized

    2. Introduction to the Constitution

      1. The Declaration of Independence:

        1. Drafted by a committee led by Thomas Jefferson in 1776. A very intellectual document drawing on the ideas of Locke, Natural Law, The Enlightenment, and Republicanism.

        2. The Layout:

          1. Statement of purpose of the document

          2. Statement of principle (foundational principles)

            • Endowed with the right to Life liberty & pursuit of happiness

            • All men created equal

            • Government derives power for the consent of the governed

          3. List of grievances (& right to dissolve a government that is no longer serving the citizens), some of which are listed below

            • There was no independent judiciary

            • Lots of immigration & naturalization restrictions

            • Standing armies among the population

            • Arbitrary and capricious meetings called

            • Lawmaking was thwarted

          4. These grievances went unaddressed (the British ignored American attempts to solve these problems)

          5. Colonies are of right and aught to be free.

        3. Is the DOI a founding document?

          1. Originally  irrelevant to domestic law & thought of as war propaganda.

          2. In the modern era  yes. It acquired its status in the early 19th century through efforts to preserve revolutionary history & became much more important as the abolitionist movement picked up. Emphasis was on right to equality.

      2. The Articles of Confederation:

        1. States would remain sovereign; unless power was expressly delegated to Congress it would be left to the states.

        2. Created a friendly league of states, NOT a nation.

        3. Delegates to Congress were appointed by State legislatures  power lay in the latter. Delegates could be recalled.

        4. Few limitations were placed on State authority (foreign affairs is one) & the national government lacked key powers – taxation, independent judiciary.

        5. Did not last long – states undermined even the powers that the national gov’t had. Revenue measures went ungratified; States undermined the treaty of Paris & major problems arose: Shay’s rebellion.

        6. All this leads to a Constitutional Convention.

      3. The Constitution:

        1. In many ways it was extralegal – it had no authorization from prior bodies of authority (especially its ratification provision).

        2. The key changes from the AOC:

          1. Increased legislative powers in Article I – to tax; to regulate interstate commerce.

          2. Creation of an executive branch in Article II

          3. Creation of an independent judiciary in Article III

        3. Federalist 10 (Madison):

          1. Identifies the chief danger to a Republican government as faction & the powers evoked by their members placing the private interest before the public interest. Ex: religion; property-holders v. non-property holders.

            • He is concerned about majority factions – not the special interest groups we have today.

          2. Why will self-interest (a natural human trait) give rise to factions?

            • People have different abilities  different faculties will lead to different levels of property accumulation.

            • Reason is fallible  people will disagree due to passion & be unable to figure out the logical answer.

          3. Identifies two possible solutions:

            • Extinguish liberty & force consensus  unacceptable

            • Control the affects of factions through the structure of government  bingo

          4. How does the Constitution Control the Effects of Faction?

            • Rejects direct Democracy  this form of government relies on the formation of majorities

            • Larger size of the Republic  the people selected to govern by the Constitution will be drawn from a wider pool; they will be more capable and can refine and enlarge the public vision of policy. Additionally, since they represent a wider group of people, it will be difficult for any faction to gain a majority

            • Deliberation – will filter the views of the people.

            • Possible downsides:

              1. Local majorities will continue to exist

              2. Lots of deliberation between heterogeneous population will impede sometimes necessary change

              3. Larger constituencies can sometime mean less accountability to the public

          5. Larry Kramer – we are rewriting history to fit our current views by highlighting Federalist 10.

          6. Thomas Jefferson – we should be a small agrarian republic. He believed in decentralization. This would facilitate participation & bring out best in citizen virtue. He also believed in promoting homogeneity as a solution to the factional problems.

        4. Federalist 51 (Madison)

          1. In order to prevent tyranny, separation of powers between the branches of government is necessary. Ambition must be made to counteract ambition.

          2. Each branch must be given the capacity to resist the encroachment of the other branches.

            • Legislature would likely predominate  bicameralism will weaken their power.

          3. If one branch is taken over by a faction, the others can then fight back & resist encroachment by the other branches

    3. Marbury v. Madison and the Establishment of Judicial Review

      1. Historical background:

        1. Tumultuous period in the history of our Republic. No one knew if the experiment set into motion by the Constitution would work.

        2. There was a struggle between the founders in an attempt to prevent the formation of a two-party system. Fear was that this would make us weak internally & externally.

        3. Fear of popular revolt & insurrection. In 1798, Congress passed the Alien & Sedition Acts – used it to try limit the publishing of pro-Republican materials.

        4. The 1800 election was a tie – House broke it after much deliberation in favor of Thomas Jefferson.

        5. In their last few days in Congress, Federalists tired to pack the judiciary.

          1. Circuit Court Act was passed – created more judicial posts to be filled with Federalists; ended circuit riding for the S. Ct.; created justices of the peace.

        6. After the elections repealed parts of the act.

      2. Marbury v. Madison, U.S., 1803, CB p. 29

        1. Facts: Marbury was appointed as a justice of the peace by a defeated President Adams at the end of his term. Senate confirmed, President signed, but Jefferson refused to deliver the commissions upon taking office. Marbury sought a writ of mandamus to compel Madison, Jefferson’s Secretary of State, to deliver the Commissions.

        2. Holding: Three separate points:

          1. Does Marbury have a right to the commission? The Π has a right to the commission; he went through the official appointment process. Π’s appointment conferred on him a legal right to the office for the space of 5 yrs; a failure to deliver the commission is a violation of such a right.

          2. Does Marbury have a remedy? There can be no remedy for political acts, but because the act involves the enforcement of the law, it is not purely political. Therefore a remedy exists, and the question of whether a right has vested must be decided by the judiciary.

          3. Is Mandamus appropriate for this sort of violation & can the court issue it?

            • The writ of mandamus is appropriate, but

            • The Supreme Court does not have the power it issue a writ of mandamus enforcing the Π’s right. A writ of mandamus cannot be issued unless the SCOTUS has appellate jurisdiction over an issue. Though statutorily, the SCOTUS has appellate jurisdiction, Art. III of the constitution gives SCOTUS original jurisdiction. Since the statute granting appellate jurisdiction goes against the constitution, it is unenforceable in a court of law. The judiciary has the power to do this because:

              1. We have a written constitution  if the writing is ignored, we no longer have a government of limited powers. Constitution forbids duties imposed upon exports from states. If Congress made such a law, the court could not be expected to enforce it (a structural argument). Constitution could not survive without judicial review; the legislature would be able to surpass its own limits by using its acts to change the constitution. The idea of a written constitution requires that there be a unit to declare acts of law void;

                1. Is this correct? There is no British equivalent to judicial review.

              2. The constitution is supreme, Art. IV; it cannot be altered by normal legislative acts & it must thus invalidate statutes in conflict;

                1. But why the Court? The Supremacy Clause does not explicitly give it such power.

              3. The judicial power is extended to “all cases arising under the constitution” in Art. III. They obviously need to look at it to figure out if they have jurisdiction – why can’t judges examine the constitution to determine the outcome of a case?

                1. There are plenty of cases (a majority) that arise under the Constitution that do not challenge the validity of a law.

              4. Judges take an oath to uphold the Constitution. Therefore, since the law granting the SCOTUS appellate jurisdiction is unconstitutional, Δ prevails.

                1. The oath is also taken by non-judges. Why should the Supreme Court’s interpretation prevail? Isn’t there a built-in incentive to adhere to the rules in the constitution, to stick to the agreed-upon rules?

        3. Remember: Judicial review was not new at this point. It had been used by the Privy Council, by State courts, by Federal Circuit Courts, & it was mentioned by Hamilton in Federalist 78.

      3. Judicial Review v. Judicial Supremacy

        1. Cooper v. Aaron, U.S, 1958, CB p. 57 (Note Case; Judicial Supremacy Example)

          1. The court decides that “the federal judiciary is supreme in the exposition of the law of the Constitution, and that principle has ever since been respected by this Court and the Country as a permanent and indispensable feature of our constitutional system.” Therefore every elected official bound to enforce the Constitution in practice is bound by the Supreme Court’s view of the constitution.

        2. This view is arguably ahistorical. The view at the time of the founding was that people are the ultimate interpreters of the constitution; they would punish legislators that went against its language through the political process.

        3. Departmentalism – current view; all braches must act on their interpretation of the constitution & the Supreme Court is merely folded into this scheme.

        4. Jefferson’s view – the court could always refuse to carry out acts of Congress it viewed as unconstitutional. This would lead to compromise between the separate branches.

        5. Countermajoritarian Objection – judicial supremacy & judicial review thwart the will of the majority and the principles of democracy.

          1. Accountability; judges are not elected.

        6. Counters to the Countermajoritarian Objection:

          1. Ackerman – at certain points of time, “constitutional moments” people will become engaged and a general will be expressed. Thus it is acceptable to have the decisions made at such key times bind our present politics.

          2. Past majorities chose this constitution; enforcing it is not counter-majoritarian at all.

          3. We want to pre-commit ourselves to certain principles that limit how we will act. This provides stability and likely prevents bloodshed. This is the Ulysses, “no matter what I say, don’t untie me” argument.

          4. We don’t have direct election of the President either; the court is responsive through the appointment process & we always have constitutional amendments.

          5. Political process is not the nicest – look @ public choice theory and how it views the horse trading in Congress.

          6. Bobbitt – the six modalities provide legitimacy for judicial review.

      4. Stripping the Court of Jurisdiction

        1. Ex parte McCardle, U.S., CB, p. 83 (The Power of Political Control over the Supreme Court)

          1. Facts: Δ was arrested and imprisoned under charges of libel. He sought habeas corpus from a federal court under an act enacted by Congress in 1867. Congress, fearing that the case would be a vehicle for invalidating the reconstruction plan, enacted a statute which repealed the provision of the 1867 habeas corpus act that gave the court jurisdiction over McCardle.

          2. Holding: The first question is necessarily one of jurisdiction. Appellate jurisdiction of SCOTUS is not derived from acts of Congress. It is, strictly speaking, conferred by the Constitution. But it conferred “with such exceptions and under such regulations as Congress shall make.” Congress has created such regulations since the founding, and it is unrealistic to argue that the Court may now exercise “general appellate jurisdiction” as though Congress had never enacted such legislation. Congress, when it comes to jurisdictional legislation, is presumed as granting such jurisdiction and NOT as acting by making exceptions to the constitutional grant of jurisdiction. Where it has not granted jurisdiction, the Court may not hear a case. The act of 1868 takes away from SCOTUS the jurisdiction defined by the act of 1867. The repeal of the 1867 grant of jurisdiction indicates that the legislature did not want the court to have such jurisdiction. Where Congress has granted no jurisdiction, the Court does not have power to “declare the law.” Case dismissed for want of jurisdiction.

          3. Remember: There are several views on this issue. Some, under the language of Art. III, argue that the Congress has, under the “exceptions” clause, the right to set the jurisdiction of the court. Others, making a more structural argument based upon Federalist 78, & Marbury, would argue that SOP requires the court to be able to perform its “essential role” & enforce its view of the Constitution.

    4. McCulloch v. Maryland and Constitutional Interpretation

      1. Historical Context:

        1. Country was at odds over the territorial expansion of slavery

        2. Hamilton – big proponent of Bank. Wanted it to borrow money for Congress to engage in nation building projects, issue notes to facilitate trade and thought it was important so that Federal Government could collect taxes.

        3. Jefferson – opposed the Bank. Wanted dispersed agrarian society and thought it was unconstitutional, because the power to create a bank was not enumerated. He read “necessary & proper” clause very narrowly.

        4. Madison – opposed bank because the power to create it wasn’t enumerated, even though he wanted a commercial nation. The bank itself did not itself collect taxes it was merely “convenient” in that way, but it was not “necessary.”

        5. The National Bank was first created in 1790 by Congress. The legislation lapsed and a republican congress failed to renew. After “embarrassments” Congress realized a national bank was necessary & created a 2nd National Bank. States began taxing it.

      2. McCulloch v. Maryland, U.S., 1819, CB p. 61

        1. Facts: Congress established the Bank of the United States. The state of Maryland imposed a tax on the bank. Legal issues: 1) does the Congress have the power to establish the Bank of the US? 2) If yes, is the tax upon the Bank by the state of Maryland constitutional?

        2. Holding: 1) The Congress has the power to establish the bank. The bill to establish the bank was debated by the legislature twice & the fact that the legislators passed the bill is very significant (precedential value). The constitution is one of enumerated powers, but where the federal government has those powers, it is supreme in that sphere of action (Art. IV; and because the Constitution is the will of the people). Though the constitution does not explicitly give the power to create a bank, it is not an instrument which excludes incidental or implied powers (Marshall poo-poos the 10th Amendment  it does not “expressly” exclude powers not given like the AOC did). The legislature does have the power to lay & collect taxes, borrow money, regulate commerce, etc.; a government, entrusted with such ample powers, on which the prosperity of the nation depends must also be entrusted with ample means of their execution. The constitution allows Congress to make “all laws which shall be necessary and proper for carrying into execution” of the enumerated powers. “Necessary” does not mean “essential,” but rather as “convenient,” or “useful.” The clause provides discretion with respect to the choosing from between the possible means to execute the duties assigned the best one. “Necessary” does not mean “absolutely necessary”  if this is what the writers had meant, they would have said so, like they do in Art 1 § 10. Reading the “necessary” strictly would also render “proper” surplusage. “Necessary” means “essential” in the prohibited context (Art. I § 10); but in the empowering context (clause is placed among the enumerated powers) it means “convenient.” While Congress does not have unlimited powers, it has the “necessary & proper” powers to do something so long as “the end be legitimate.” If the end is within the scope of the constitution (within the enumerated powers), all means which are appropriate, which are plainly adopted to that end, which are not prohibited, but consist with the letter and spirit of the constitution are constitutional.

2) The state governments may not levy duties on imports/exports to/from other States. Art. I § 10. This is a recognition by the founders that the power to tax depends in terms of restraint only on the will of the people (States are not allowed to tax the products from other States b/c the citizens in the producing States have no choice in the matter  this is too much power for the importing States). Similarly, when what is being taxed is the means employed by the government of the Union, the State is taxing US citizens which have no just democratic recourse  they have no such right. Where there is no democratic recourse, the power to tax is the power to destroy, or to cow the federal government at the feet of the states. This fact is in direct conflict with the Supremacy clause in Art. IV. The democratic deficit above and the unrestrained power it gives to States to tax federal entities, would make mince meat of the federal Supremacy clause, if allowed to persist. States, through taxation could retard, impede, burden, or in any manner control the operations of the constitutional laws enacted by Congress. The statute is therefore unconstitutional.

        1. Remember: Holding 1) is the root of the rational basis test. So long as what Congress adopts is related to one of its enumerated powers, it is legitimate. Holding 2) represents the idea or Representation-Reinforcement  judicial review used to improve representation for those affected by decision but without representation. We see the first inklings of judicial supremacy – Marshall says “this tribunal alone” has the power.

      1. Jackson’s Veto Message, CP

        1. Each branch has the authority to determine its own interpretation of the Constitution and the constitutionality of legislation

        2. Says Marshall’s view that Congress should pass legislation that is convenient is dangerous  too much deference to Congress.

        3. What did Jackson not like about national bank?

          1. Xenophobia

          2. He is suspicious of controlling corporate interests

          3. He is worried that by enacting a national bank, it would trample on the rights of the States.

          4. The existence of a national bank is a bulwark against Federal power.

          5. Pretext – Congress may act pretextually: federal government might use its implied powers to achieve goals outside of its authority.

  1. The Commerce Clause & the Powers of Congress

    1. The Values of Federalism:

      1. Introduction:

        1. The constitution requires power sharing:

          1. The states have control over police powers, (health & safety) but within the limits of the Supremacy Clause (Art. IV), & Art. I § 10, and the Bill of Rights.

          2. Where the federal government and the states both have power to regulate, federal law preempts the state law. Art. IV.

      2. The Values Behind Federalism:

        1. Federalism Promotes Efficiency:

          1. Homogeneity promotes efficiency  it is easier to pass legislation because there is a smaller set problems and concerns which affect large portions of the local populace.

          2. Decision-making is likely to be better at a local level  experimentation allows to choose the most efficient solutions for the local situation.

            • Counters:

              1. It might create to too much bureaucracy and impede action  less efficiency.

              2. A lot of modern problems are difficult for local govts to solve, because they are too complicated and require a lot of resources.

              3. Local factions are more likely to capture politicians at local level than at national level

              4. It all depends on what issue you are talking about – some issues best dealt with at local level, & some at the federal level.

        2. Federalism Promotes Individual Choice:

          1. Decentralization allows people to vote with their feet; creates more options, “packages of laws” that citizens can select

            • Counter:

              1. It is often expensive to move

              2. The system often doesn’t capture nuances of preferences; eventually states might converge and have policies that reflect majority views

              3. Externality problem  might lead to a system where those benefiting from a system are not bearing the costs

        3. Federalism Promotes Experimentation/Competition

          1. Experimentation – more governments means more opportunity to try different solutions to common problems (O’Connor/Brandeis reasoning). The states as laboratories for novel social science solutions that the federal government would be too cautious to attempt.

            • Counter by Ackerman – there is a barrier of experimentation even to states. There is a cost borne by the state that tries something new & a low cost to doing the same old (a free-rider problem of sorts).

            • Federal government is a better innovator (has access to more sophisticated lobbying)

          2. Race to the top – states will make decisions that are most efficient, and other states will follow by harmonizing (DE corporate law).

            • But it may also be a “race to the bottom” in terms of environmental & labor laws.

              1. Revesz – these races do not actually happen. Most of the time voters want both economic efficiency & clean environment – and the result is a compromise that maximizes both.

              2. Externalities problem: some states with lax environmental laws will affect the environmental quality in other states – OH, for ex.

        4. Federalism Promotes Democracy & Prevents Tyranny

          1. People are more involved at the lower levels of government; giving lower political units power promotes such involvement.

          2. Provides a check on Power (Rapacznski) – it is more likely that a government will oppress you if you don’t have the option of moving into a different policy environment across state lines.

      3. Might a nationalized government be preferable?

        1. Would prevent a certain amount of duplication – two governments equals twice the red tape; twice the taxes.

        2. Largescale problems might be better solved at the federal level.

    2. Commerce Clause I: The Nineteenth Century:

      1. Art. I, § 8: “Congress shall have the Power . . . To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.

      2. Some history:

        1. Commerce clause power was little used before the Civil War

        2. Congress was much more focused on the debate over slavery and it was difficult to reach a consensus

      3. Gibbons v. Ogden, U.S., 1824, p. 170

        1. Facts: NY enacted statute granting RL exclusive right to operate steamboats in NY waters. RL licensed rights to O to ferry from NYC to Elizabethtown. G began operating a competing ferry service, which violated the right to RL in NY waters. G was however licensed under a Congressional statute. O sued for injunction.

        2. Holding:

          1. Commerce is more than just the traffic of goods; it is intercourse between nations, parts of nations, and it is regulated by prescribing rules for carrying on that intercourse. All America understands the word “commerce,” to comprehend navigation.

          2. The word “among” means “intermingled with;” commerce among the States cannot stop at the external boundary line of each state, but may be introduced into the interior. Commerce among the states however does not comprehend commerce which is completely internal and does not extend to or affect other states. The federal government therefore has jurisdiction to regulate commerce external to the state, and internal concerns which affect the States generally.

          3. The power to regulate is the power to prescribe the rule by which commerce is to be governed. This power is complete in itself, may be exercised to its utmost extent and acknowledges no limitations other than are prescribed in the constitution.

          4. Inspection laws act upon the subject before it becomes an article of foreign or inter-state commerce and makes part of the law most advantageously exercised by the States themselves. No direct general power over these objects is granted to Congress, and therefore they remain subject to State legislation. The NY state monopoly is pre-empted by the 1793 statute allows O to operate his ferry.

        3. Remember: Marshall makes a very textual argument here; he breaks up the clause into three. Part iv above is dicta – he is trying to carve out the state police power from pre-emption by federal law. He distinguishes the police power from the power to regulate commerce. Basic point of the case: Congress should be trusted to use this power fully.

    3. Commerce Clause II: Before the New Deal:

      1. Brief History:

        1. The civil war & industrialization however changed the situation on the ground, and lots of social and regulatory legislation started to be enacted.

        2. Most important acts of the era:

          1. Sherman Anti-Trust Act in 1890

          2. Interstate Commerce Act of 1887

      2. United States v. E.C. Knight Co., U.S., 1895, p. 187

        1. Facts: The US invoked the Sherman Act to set aside the acquisition by the American Sugar Refining Company of four competing refineries (giving it 98% of the market).

        2. Holding: The Constitution does not allow Congress to regulate manufacturing. Controlling manufacturing regulates commerce in a secondary and not in the primary sense; and it does not control commerce and affects it only incidentally and indirectly. Additionally, commerce succeeds to manufacture, and is not a part of it. The fact that an article is manufactured for export to another State does not of itself make it an article of interstate commerce and the intent of the manufacturer does not determine the time when the article or product passes from the control of the State and belongs to commerce.

        3. Dissent: When manufacture end, that which has been manufactured becomes a subject of commerce; buying and selling succeed manufacture, precede transportation, and are as much commercial intercourse, where articles are bought to be carried from one State to another, as is the manual transportation of such articles after they have been purchased. Why not just allow the national government to regulate these industries directly? Whatever obstructs the free course of interstate intercourse and trade (monopoly in this case), as involved in buying and selling of articles to be carried form one State to another may be reached by Congress.

        4. Remember: This is the “best & worst” example of the Court’s attempts to regulate the commerce power in this period. It is a problem that could not be solved by the states (there is always an incentive to be the one state that allows monopolies and make use of the revenues at the cost of the national consumers). Majority creates two distinctions:

          1. Formal distinction based upon time; production precedes commerce and cannot be regulated.

          2. Distinction between indirect (can be regulated) & direct effects (can’t be regulated) on interstate commerce.

        5. The test under EC Knight:

          1. Does the activity regulated proceed or succeed interstate commerce?

            • If yes  go to ii

            • If no  go to iii

          2. Does the activity regulated have a direct or indirect effect on interstate commerce?

            • If direct  go to iii

            • If indirect  Congress is powerless

          3. Is Congress regulating pretextually?

            • If yes  Congressional regulation is void

            • If no  regulation is upheld

      3. Formal Limits:

        1. Prophylactic effect – limits the powers of government just in case the government might use that power in a tyrannical way

        2. Problematic – they create uncertainty (diverging decisions) and bad incentives; they elevate form over substance.

          1. Colorado Coal Co. v. United Mine Workers, US, p. 188 – unions intending to affect price of commodity nationally through a nationwide strike can be regulated by Congress under the Sherman Act.

      4. Stream of Commerce Cases:

        1. Swift & Co. v. US, US, 1905 – upholds application of the Sherman Act to a price-fixing scheme among meat dealers. Each of the meat dealers operated only in one state. Using the metaphor of a “current of commerce,” because livestock is shipped into the stock yard and immediately shipped back out, Holmes holds that the federal government has power to regulate.

        2. Stafford v. Wallace, US, 1922, p. 189 – upholds the application of an act to set rates and standards for stock yards where livestock was kept for sale or shipment in interstate commerce. Taft held that the stockyards are but “a throat through which the current” of commerce flows.

        3. Reconciling these with EC Knight – RR are a form of interstate commerce that can clearly be regulated. Most stock yards were located near railroads – thus the idea of the stock yard was related to the idea of the railroad; there is a connection.

      5. Shreveport Rates Case, p. 188 – Here the RR was charging more for travel outside the state than within (for the same distance). The ICC tells the company that it has to charge the same rates per mile inside and outside the state. The court upholds the regulation, even though the ICC is regulating only the intrastate system, because Congress has the power to “foster and protect interstate commerce.” Rodriguez explanation: they are taking a functional approach.

      6. Champion v. Ames, U.S., 1903, CB p. 190

        1. Facts: Federal Lottery Act of 1985 made illegal the interstate transportation of foreign lottery tickets. C was indicted for shipping such items from Texas to Calif.

        2. Holding: The carrying from one State to another of commodities that are ordinary subjects of traffic constitutes interstate commerce. The power of Congress to regulate commerce among the states is plenary, subject to no limitations except as may be found in the Constitution. There is nothing to say that it is part of one’s liberty to introduce into commerce an element that will be injurious to public morals. Congress has not assumed to interfere with the completely internal affair of any state, and has only legislated in respect of a matter which concerns the people of the United States. Just as a state can forbid the sale of all lottery tickets within its jurisdiction for the protection of the morals of its citizens, Congress can legislate in this case for the purpose of guarding the people of the US. Protection from abuse comes from the political process.

        3. Dissent: This gives Congress a “general police power” because it amounts to saying that everything is an article of commerce the moment it is taken to be transported from State to State.

        4. Remember: This is a formalist decision; it allows the tickets to be regulated because they are objects crossing interstate lines, even though the Congress is arguably regulating “morals” not “commerce.” Pretext limitation is abandoned here.

      7. Hammer v. Dagenhart, U.S., 1918, CB 173

        1. Facts: Congress enacted the Child Labor Act, prohibiting the transportation in interstate commerce of goods produced in factories employing children under age of fourteen, or employees fourteen to sixteen year olds for more than eight hours a day. The father of two children working in two factories secured an injunction against the enforcement of the act on the grounds of unconstitutionality.

        2. Holding: This act does not regulate transportation among the states, but aims to standardize employment age; the mere fact that the intended (and already produced) products were intended for interstate commerce transportation does not make their production subject to federal control. There is no power vested in Congress to require the States to exercise their police power so as to prevent possible unfair competition (in terms of lower wages). The commerce clause was not intended to give Congress a general authority to equalize conditions between the states and prevent “unfair competition.” The states themselves must decide.

        3. Dissent: The statute in question is within the power expressly given to Congress if considered only as to its immediate effects and if invalid it is so only upon some collateral ground. Congress is given power to regulate such commerce in unqualified terms.

      8. Explaining the Apparent Disharmony in These Cases:

        1. Cushman, p. 189 – Principle in the Supreme Court’s application of the commerce clause limitation: only those intrastate enterprises affected with a public interest were within the reach of the Federal Government’s regulatory power. This applies to “stream of commerce” (slaughterhouses) and RR rate setting. For businesses with no public interest (sugar refiners)  no regulation.

        2. Politically-motivated use: the Court generally favored laissez-faire economics, but disliked immoral acts (gambling).

        3. Conflicted justices: the Supreme Court was torn between the principle of limited federal power (enshrined in the Constitution) and the realism of an increasing need for national power to deal with social and economic problems of industrialization.

      9. Formalism (Rules) v. Functionalism (Standards)

        1. Rules are categorical statements that can be applied from case to case with little or no interpretation. The EC Knight distinctions based on 1) time & 2) direct/indirect are an example. Rules tend to be formal; they are blunt instruments with which to decide cases & allow for little flexibility to factor in equitable concerns.

          1. Benefit: rules are more consistent and cheaper to administer

          2. Problem: rules based formalism sometimes becomes arbitrary

        2. Standards ask questions and provide guidelines which help a judge determine how a case would turn out.

          1. Problem: standards invite judges to apply their views; can be easily manipulated to reach an outcome.

        3. The important question to ask is: do we prefer arbitrary results from transparent rules or do we prefer decisionmaking that allows judicial judgment and more flexibility?

        4. As we go through the commerce clause cases, keep this question in mind. In coming to such a conclusion think about formalism v. functionalism.

    4. Commerce Clause III: The New Deal

      1. Early New Deal:

        1. Historical Background:

          1. Democrats emphasized that the US was in the midst of national crisis & FDR was elected with a mandate to deal with that crisis. FDR made a promise at his political convention: that the masses had to get a piece of the pie. He also emphasized that the Republican Supreme Court and elected officials were enforcing conservative economic laws that were not the only way to go.

          2. His actions during the first 100 days showed his radical side – lots of economic regulation was enacted (belief in 1932 among FDR advisors was that laissez-faire was the problem). They pushed a shift in the regulatory system from anti-trust laws to industrial economic cooperation.

          3. NIRA was the centerpiece of the first set of New Deal laws. It set maximum hours, minimum wages, trade practices, and provided criminal punishments for violations. Its goals were to: stabilize production by settling labor unrest; keep prices artificially high (reducing competition, allowing payment of higher wages, and thus stimulating the economy).

            • In reality, the NIRA raised prices but lowered wages.

            • Employers ignored the collective bargaining requirements.

            • Big business designed the codes (running small people out of the market). The NIRA was generally perceived as a failure.

            • The government already knew it was a disaster, and it was not going to be renewed

          4. Court at this time was composed of 4 conservatives, 2 swing justices, & 3 liberals.

          5. Roosevelt decided he wanted a test case to see how far the court would let the executive branch go. Some speculate that FDR did this for political points so that he could increase vis-à-vis the Court.

            • NIRA was first piece of New Deal legislation reviewed by the Court. The majority concluded that the government had gone too far.

        2. A.L.A Schechter Poultry Corp. v. United States, U.S., 1935, CB 193

          1. Facts: Congress passed the NIRA which authorized the president to approve “codes of fair competition” developed by private industry. Live Poultry Code was approved for NYC, establishing labor regulations & trade practices. Schechters were slaughterhouse operators convicted of violating the wage and hour provisions of the code & the trade practices of the code. Their live poultry shipped by RR from other states, but their processed product was sold only locally.

          2. Holding: Extraordinary conditions (the depression) do not create or enlarge constitutional power. 1) These transactions were not in interstate commerce; though the poultry arrived from other states, the actions here merely succeed interstate commerce; Δs held the poultry for local slaughter and sale to retail dealers (slaughtering and sales were not part of interstate commerce). 2) The poultry handled by defendants at their slaughterhouse markets was not in a “current” or “flow” of interstate commerce; the flow in interstate commerce had ceased – the chickens were not going to any other state, but to local markets. 3) The transactions do not “directly affect” interstate commerce (unlike the setting of RR rates). Argument that hours and wages affect prices proves too much  if the federal gov’t can determine wages and hours of employees in the internal commerce of a State, such control could be exerted over any elements of the cost of production. The authority of the federal gov’t may not be pushed to such an extreme as to destroy the distinction between commerce “among the several States” and the internal concerns of the state.

          3. Concurrence: Argues that law is not indifferent to “considerations of degree.” Activities local in their immediacy do not become interstate and national because of distant repercussions (there is a threshold below which commerce cannot be interstate). What is near and what is distant may at times be uncertain, but to find immediacy or directness here is to find it almost anywhere.

          4. Remember: Majority takes the formalist view: the important thing here is the “nature” of the activity; the degree of its effects in not important. Concurrence takes a realist/functionalist position: degree matters.

        3. Historical Background II: The Reaction to Schecter & the 1936 Election

          1. Immediately following the decision, FDR holds a press conference, chastising the court for its “horse and buggy” interpretation of the commerce clause.

          2. Bituminous Coal Act (barely passed; most thought it would fail) was stuck down during the campaign season  see Carter v. Carter Coal Co., below.

          3. During his second campaign (1936), FDR makes an issue of the court’s intransigence on economic regulation. He claimed that the Constitution is defined by the people, not by the court’s legal mumbo-jumbo.

        4. Carter v. Carter Coal Co., U.S., 1936, CB 195

          1. Facts: Congressed passed the Bituminous Coal Conservation Act of 1935 to stabilize the industry; it established pricing boards and a code which provided for collective bargaining (hour and wage rules would be applied to an entire area once enough were negotiated). A stockholder of the Δ sued the company to enjoin it from complying with the code.

          2. Holding: The statute’s labor provisions are unconstitutional & since the price provisions are not severable, they are also struck down. 1) Congressional belief that it has a general power to deal with crises is rejected by the court. The word “commerce” is the equivalent of the phrase ‘intercourse for the purpose of trade.’ 2) The employment of men, fixing of wages, etc. do not constitute such intercourse, but rather constitute intercourse for the purpose of production. 3) Mining is a local activity. There is also no direct affect on interstate commerce; the distinction between direct and indirect effect turns not upon the magnitude of either the cause or the effect, but entirely upon the manner in which the effect has been brought about (the activity matters, not the magnitude of the effect). Working conditions are local conditions, and the employees are merely producing a commodity; any effect that may exist upon interstate commerce is secondary or indirect.

          3. Dissent: Statute’s price provisions are severable & constitutional; the challenge to labor provisions is premature. The law is not indifferent to considerations of degree. The price of intrastate sales of coals have so inescapable a relation to those for interstate sales that a system of regulation for transactions of one class is necessary to give adequate protection to the system of regulation adopted for the other. Thus, the direct effect needed to give Congress jurisdiction exists for the price provisions.

          4. Remember: Shows the distinction between realism (dissent) and formalism (majority). Realism takes into account the degree of the effect on interstate commerce; formalism looks merely at the “nature” of the activity (is the activity one that proceeds commerce? Is the affect “direct”?) and ignores magnitude.

      2. The Switch in Time

        1. Historical Background:

          1. FDR wins in a landslide and gets a second 100 days of legislation passed; this time however, the legislation was not a radical, full-blown attack on capitalism  rather it involved heavy regulation of markets.

            • This second phase produced The Wagner Act; The Social Security Act.

          2. Senator Wheeler proposed an Amendment which allows the Congress to re-enact an Act that has been struck down by the Court with a 2/3 majority. FDR does not go through with it, and instead proposes a statute to pack the court, adding a new justice for every justice over 70.

          3. Public did not react very well, but the Senate debated the plan. In the case below, the court cut off that debate and created the “switch in time that saved nine.” Judge Roberts, who had often voted to strike down these laws, changed his vote.

        2. NLRB v. Jones & Laughlin Steel Corp., US, 1937, p. 200

          1. Facts: The NLRA established a comprehensive system for regulating labor/management relations. The findings of Congress in enacting the act couched the reasoning for the act’s creation as preventing the burdening/obstructions of commerce caused by industrial relations. Δ fired an employee that attempted to organize a union & was charged with an unfair labor practice by the NLRB. Δs challenge constitutionality of the Act.

          2. Holding: The Δ company has steel mills in PA, coal & raw material mines in Michigan & Minnesota, and lots of other subsidiaries/operations in other states. The court does not find it necessary to determine whether the Δ’s business is in the “stream of commerce.” Congress can exercise control over activities of an intrastate character when such activities have such a close and substantial relation to interstate commerce that their control is essential or appropriate to protect interstate commerce from burdens and obstructions. Stoppage of Δ’s operations due to industrial strife would have a very serious affect on interstate commerce  this act deals with such a problem.

          3. Remember: Majority here abandons the formalist approach for the Cardozo realist take  it is all a matter of degree; one must now look to the extent of the effect on interstate commerce of the regulated activity. This case can be reconciled with previous ones based on the particular facts: the important thing here is that the specific activity being regulated has an effect.

        3. West Coast Hotel v. Parish, US, 1937, CP

          1. Facts: Minimum wage case.

          2. Holding: Court reverses a previous decision, Morehead (1936) which held it unconstitutional to set a minimum wage for women and allows Washington State to do so. It thus eviscerated the freedom of contract interpretation of the 14th Amendment from the Constitution.

          3. Remember: More evidence of a switch in time  this is a drastic change considering that the court had struck down such a statute just one year before. Much more drastic that the change from Cater Coal to NLRB.

        4. Explaining The Switch in Time:

          1. Externalist: Traces the switch to political pressure placed on Court by Roosevelt’s court packing plan. Political pressure struck fear in the court and caused it to change course to save itself from being packed with New Dealers.

            • Under this view, Constitutional law is politics by other means – justices are engaged in same political struggle as President, Congress.

            • After Carter and Morehead, there was a public outcry against the Court. Depaldo (struck down NY’s min wage law) showed that the Court was not just interested in restraining fed power but determined to prevent states from acting in interest of labor as well.

            • While court packing plan debated, the switch took place:

              1. Hughes was always inclined to vote with liberals in some cases so his vote is not that surprising

              2. Roberts simply switches, he had no history of sometimes siding with the liberals. He simply caved to political pressure and voted with them to save court from being packed.

                1. There is no actual documentation of Roberts’ reasons.

                2. Memo by Roberts exists stating that he voted with majority in West Coast Hotel only because the people litigating the case didn’t ask for the court to overrule Adkins – if had asked, then he would have voted the other way. Thus in West Coast Hotel, his vote arguably wasn’t a switch; rather he was influenced by evidence and a vision of issues raised at the right time. Many people believe this memo actually forged (by Frankfurter) to sure up court’s legitimacy in Brown.

          2. Internalist (Barry Kushman; referenced in Notes): Takes the view that the court’s shift was caused by internal reasons:

            • Jones involved a much larger enterprise than Schecter and Carter; it is therefore not inconsistent with prior case law to treat the Act differently and find its application constitutional.

            • Roberts keeps upholding statutes even after court packing threat was dead. Therefore, the reason for the switch could not have been the court packing plan.

            • The Court packing plan was already dead by time the Court decided Jones  the political pressure had already dissipated.

            • Evidence shows that the Court voted in West Coast Hotel before the court packing plan was even announced

            • There were two pre-1937 cases consistent with the decision in West Coast Hotel:

              1. Blaisdell (gave states room to pass debtor forgiveness laws, restricting the scope of the contract clause in this context) and

              2. Nebia v. NY (court recognizes states rights to set prices in milk industries)

          3. Dualist (Limitations to the debate):

            • Most cases are the result of a hybrid of factors, both internal and external

              1. Internalist: In exposing arbitrariness of the formalist categories, realists made clear that personal views about the scope of federal power were influencing these decisions; that it was not something predetermined by doctrine. The Court couldn’t hide behind mechanical interpretation anymore

              2. Externalist: Because of FDR’s popularity, people like Cardozo realized that they couldn’t keep striking down statutes and so did an about face. Doctrinal forces and the exposure of ideology working in tandem with political forces led to the switch.

          4. Ackerman’s revisionist narrative: The Court before Jones and West Coast Hotel was doing FDR a favor by striking down statutes to limit federal power. This forced FDR to get a clear mandate (to create a constitutional dialogue) from the People for changing the scope of the federal power.

            • The reason for the switch was this constitutional dialogue (Ackerman points to the extensive public debate and the widespread social movements going on at time (organizing around workers rights, strikes)). The campaign in 1936 was very much about the Court and power of federal government to respond to crisis. When court switched in 1937, it killed this constitutional dialogue in order to save itself.

            • Darby and Wickard are constructive Constitutional Amendments – not passed through Art. V, but handed down by the Court during this dialogue. The court was responding to a mobilization of the People.

        5. US v. Darby, US, 1941, CB 204

          1. Facts: Δ is charged with violating the Fair Labor Standards Act (prohibits the shipment in interstate commerce of goods manufactured by employees paid below the minimum wage and above a certain number of hours & makes illegal production “for interstate commerce” in violation of these provisions).

          2. Holding:
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