Decided on May 18, 1936, Carter v. Carter Coal Company proved to be a significant case on the Supreme Court’s docket. The issue at hand dealt with the enactment of the Bituminous Coal Conservation Act of 1935 under one of President Franklin D. Roosevelt’s many New Deal programs. This particular act created to fair labor practices by regulating the price of coal, establishing a minimum wage, and providing maximum working hours. As an incentive to promote the act, companies that complied were given tax refunds. Nearly a year later the legislation was quickly ruled unconstitutional when James W. Carter, shareholder of Carter Coal Company filed a suit against his own company. In an effort to forfeit the non-compliance tax attached to the act, Carter filed a lawsuit against the federal government. His claim was that the coal mining was not a part of interstate commerce so Congress had no reason to regulate the coal industry. Thus generating the question of whether or not Congress did in fact have the power to regulate the coal mining industry. In a 5-4 decision, the court ruled in favor of Congress by using the Commerce Clause as justification. According to the majority, the Bituminous Coal Conservation Act had infringed on congressional power. The case became significant because it remained the only case of a long time that the Supreme Court declared an act of Congress to be unconstitutional using the Commerce Clause. It wasn’t until 1995, a fifty-nine year gap, that the Supreme Court would visit a fairly similar issue of production and commerce distribution, when deciding on United States v. Lopez.
Congress passed the Bituminous Coal Conservation Act (the “BCCA”) to create a national commission of coal miners, coal producers, and private citizens to help regulate the coal mining industry by establishing standards for fair competition, production, wages, hours, and labor relations. All mines were required to pay a 15% tax on coal produced; compliance would refund mines 90% of this 15% tax. The BCCA delegated to the commission the power to fix the minimum and maximum prices of coal at every mine in the United States. Additionally, the labor relations provisions of the BCCA gave coal mine employees the right to organize and enter into collective bargaining agreements in all states. Although compliance with the BCCA was purely voluntary, Congress encouraged compliance by rewarding participating coal mines with a tax rebate for abiding by the BCCA’s provisions. Congress felt justified in passing this legislation because of their economic approach that allowed them to regulate anything that would affect the economy.
Carter (Plaintiff) sued his own company, Carter Coal Co. (Defendant) to enjoin it from paying the required tax for noncompliance under the BCCA. The BCCA was primarily challenged due to its assertion that Congress had the authority to regulate the production of coal because it directly affected interstate commerce.The trial court found that the labor provisions of the Act and Code were unconstitutional, but that the price-fixing provisions were valid, and were separable from the labor provisions. It therefore denied relief, except for granting a permanent injunction against collection of taxes accrued during the suit. The United States Court of Appeals for the District of Columbia and the Circuit Court of Appeals for the Sixth Circuit affirmed the trial court’s ruling. Petitioners then brought the case to the United States Supreme Court.
Did the Bituminous Coal Conservation Act of 1935 exceed congressional powers under the Commerce Clause?
Arguments by Petitioner
(1) That a so-called excise tax, imposed by the Act, of 15% of the sale price or market value at the mine of all bituminous coal produced in the country, subject to a draw-back of 13 1/2% allowed to those producers who submit to the price-fixing and labor, provisions of the Act, is not a tax, but a penalty to coerce submission, and cannot be upheld as an expression of the taxing power.
(2) The provisions of the Act looking to the control of the wages, hours, and working conditions of the miners engaged in the production of coal, and seeking to guarantee their right of collective bargaining in these matters, are beyond the powers of Congress, because
(a) The Constitution grants to Congress no general power to regulate for the promotion of the general welfare.
(b) The power expressly granted Congress to regulate interstate commerce does not include the power to control the conditions in which coal is produced before it becomes an article of commerce.
(c) The effect on interstate commerce in the coal of labor conditions involved in its production, including disputes and strikes over wages, etc., is an indirect effect.
(3) Since a mine owner, by refusing to accept the regulatory provisions, would incur a prohibitive tax and be deprived, by other provisions of the Act, of the right to sell coal to the United States or to any of its contractors for use in performing their contracts, the regulations are, in fact, compulsory. In view of this compulsion, provisions of the Act seeking to authorize part of the producers and miners to fix hours for the entire industry, and part of the producers and miners in the districts to fix minimum wages in their districts, are legislative delegations in its most obnoxious form, and clearly violate the Fifth Amendment.
(4) The price-fixing provisions are not separable from the provisions concerning labor, and therefore cannot stand independently. They are so related to and dependent upon the labor provisions, as conditions, considerations or compensations, as to make it clearly probable that, the latter being held bad, the former would not have been passed.
(5) The constitutionality of the price-fixing provisions is not considered.
Arguments by Respondent
In a 5 to 4 decision, the Court held that the 1935 Act overstepped the bounds of congressional power. The Court ruled that “commerce” is plainly distinct from “production.”
Majority: Sutherland, joined by Butler, McReynolds, Roberts, and Van Devanter.
Dissent: Cardozo, joined by Brandeis, Stone
Hughes concurred in part and dissented in part.
Majority Opinion (Sutherland)
Justice Sutherland wrote the majority opinion, which was joined by Justices Butler, McReynolds, Roberts and Van Devanter.
“…everything which moves in interstate commerce has had a local origin. Without local production somewhere, interstate commerce . . . would practically disappear.”
The Court held that just because a product is manufactured and intended to be used for interstate commerce, it does not fall under regulation by Congress.
A commodity that is produced and meant to be sold is not a part of interstate commerce, rather a step leading to interstate commerce.
Mining is not interstate commerce. It is a local business and subject to local control and taxation.
The Court held the definition of ‘commerce’ meaning “intercourse for the purposes of trade” and claimed that mining does not fit this definition.
Employing workers, setting wages and working hours, and mining coal were found to be part of the local process of production, separate from any trade of goods that could be regulated under the Commerce Clause.
The labor board of commissions has authority over production not commerce; further asserting that production is a local activity.
If the production of coal by a single person does not affect interstate commerce, then the same may be said of the production of coal by many people.
The federal government does not have legislative control over local activity.
“The federal regulatory power ceases when interstate commerce ends; and, the power does not attach until interstate commercial intercourse begins.”
Concurring Opinion (Hughes)
Justice Hughes wrote a concurring opinion, agreeing with the other five justices that the act’s labor provision was unconstitutional because it was poorly drafted and did not fall within Congress’ jurisdiction to regulate interstate commerce.
“…that the constitutional power of the Federal Government to impose this penalty must rest upon the commerce clause, as the Government concedes; that production — in this case, mining — which precedes commerce is not itself commerce, and that the power to regulate commerce among the several States is not a power to regulate industry within the State.”
Justice Hughes may reach the same conclusion as the signatories of the majority opinion, but differs slightly in his reasoning as to whether the policy of fixing of prices of commodities sold in interstate commerce was a sound policy for judicial consideration. Hughes argued that the question of this policy and its applications were for Congress to decide and not the Court.
Additionally, Hughes argues that the Court’s determination that the invalidity of the labor provisions requires the condemnation of the entire Act is incorrect, and that he cannot concur in that section of the opinion because he believes that the express provisions of the Act indicate that they are not inseparable. He provides evidence of his reasoning citing provisions of the Act itself, as well as the fact that that the labor provisions are located in a separate section of the Code.
Therefore, he concludes:
“…the Act, and the Code for which it provides, may be sustained in relation to the provisions for marketing in interstate commerce, and the decisions of the courts below, so far as they accomplish that result, should be affirmed.”
Dissenting Opinion (Cardozo)
Justice Cardozo wrote the dissenting opinion and was joined in full by Justices Brandeis and Stone, and joined in part by Justice Hughes. He argues that
(a) Part II of the statute sets up a valid system of price-fixing as applied to transactions in interstate commerce and to those in intrastate commerce where interstate commerce is directly or intimately affected. The prevailing opinion holds nothing to the contrary.
(b) Part II, with its system of price-fixing, is separable from Part III, which contains the provisions as to labor considered and condemned in the opinion of the court.
(c) Part II being valid, the complainants are under a duty to come in under the code, and are subject to a penalty if they persist in a refusal.
(d) The suits are premature insofar as they seek a judicial declaration as to the validity or invalidity of the regulations in respect of labor embodied in Part III. No opinion is expressed, either directly or by implication, as to those aspects of the case. It will be time enough to consider them when there is the threat, or even the possibility, of imminent enforcement. If that time shall arrive, protection will be given by clear provisions of the statute (§ 3) against any adverse inference flowing from delay or acquiescence.
(e) The suits are not premature to the extent that they are intended to avert a present wrong, though the wrong upon analysis will be found to be unreal.
Full Text of Opinions
This case was significant because it was decided during Franklin Roosevelt’s re-election campaign, the bulk of which emphasized implementation of his New Deal legislation, which would give the federal government a new role in society. This case, along with many others that were decided before 1937, consisted of Congress’ attempt to regulate economic production. The Supreme Court declared Congress’ attempt to control the production of commodities as unconstitutional because it was a power which was not granted to them by the Commerce Clause. Carter v. Carter Coal Co. was especially significant because it was the last case involving an economic operation that Congress could not regulate. In other words, after Carter v. Carter Coal Co. the Substantial Effects Doctrine allowed for Congress to control or regulate any activity that had an effect on commerce, even if that activity is not commercial or economic in and of itself. After Carter v. Carter Coal Co. this period of the Substantial Effects Doctrine would last for nearly 60 years up until United States v. Lopez (1995).
Scholarly Commentary and Debate
Article 1, Section 8, Clause 3: The Commerce Clause. This provision grants Congress the power “…to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.”
Amendment X: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.”
Government Law or Action Under Review
Bituminous Coal Conservation Act of 1935
- Gibbons v. Ogden (1824)
- Kidd v. Pearson (1888)
- United States v. E. C. Knight Co. (1895)
- Hammer v. Dagenhart (1918)
- Adkins v. Children’s Hospital (1923)
- Schechter Poultry Corp. v. United States (1935)
Important Subsequent Cases
- United States v. Darby (1940)
- Wickard v. Filburn (1942)
- Gonzales v. Raich (2005)
- United States v. Lopez (1995)
- Brown, B. (Ed.). (n.d.). Carter v. Carter Coal. Retrieved December 09, 2016, from http://www.benbrownshistoryandlaw.com/carter-v-carter-coal-1/
- Carter v. Carter Coal Company. (n.d.). Retrieved December 09, 2016, from https://www.oyez.org/cases/1900-1940/298us238
- Carter v. Carter Coal Co. 298 U.S. 238 (1936). (n.d.). Retrieved December 09, 2016, from https://supreme.justia.com/cases/federal/us/298/238/case.html
- Carter v. Carter Coal Co. (n.d.). Retrieved December 09, 2016, from https://www.law.cornell.edu/supremecourt/text/298/238
- Carter v. Carter Coal Co. Case Brief – Quimbee. (n.d.). Retrieved December 09, 2016, from https://www.quimbee.com/cases/carter-v-carter-coal-co
Academic Books, Articles, and Law Reviews
- VILE, JR. Encyclopedia of Constitutional Amendments, Proposed Amendments, and Amending Issues, 1789–2010, 3rd Edition [2 Volumes] : Third Edition. 3rd ed. Santa Barbara, Calif : ABC-CLIO, 2010. 3rd ed. ISBN: 9781598843163.
- Production and Commerce among the States: Carter v. Carter Coal Co. (1936). Harvard Law Review, (2). 307.
- III, L. S. (2014). THE RETURN OF CONSTITUTIONAL FEDERALISM. Denver University Law Review, 91221.
- Primus, R. (2016). WHY ENUMERATION MATTERS. Michigan Law Review, 115(1), 1-46.
- Schwartz, B. (1997). A book of legal lists: the best and worst in American law, with 100 court and judge trivia questions. New York: Oxford University Press, 1997.
- Casey, K. P. (1942). Bituminous coal handbook. [electronic resource] : Bituminous Coal Act of 1937, rules of practice and procedure, rules and regulations for registration, marketing rules and regulations, comptroller general’s decisions, general orders and schedules of discounts, statements, opinions and rulings. Albany, N.Y. : Matthew Bender and Company, .
Kelechi Ohanu, Reaghan Braun, Lynesia Renae Denson, Lashanah Thomas (Fall 2016)
Tasks for Future Contributors
Arguments of Respondent, Carter Coal Co. & Decision Analysis