Facts

New York City serves as the largest live-poultry market in the United States, with 96 percent of its poultry arriving from other states, primarily by rail and consigned to commission men or receivers. The petitioners, A.L.A. Schechter Poultry Corporation and Schechter Live Poultry Market, operated wholesale poultry slaughterhouse markets in Brooklyn, purchasing live poultry mainly from commission men in New York City or Philadelphia for slaughter and resale. After trucking the poultry to their Brooklyn facilities, they sold it, usually within 24 hours, to local retail dealers and butchers who then sold to consumers; the petitioners did not engage in interstate sales.

The Live Poultry Code, approved by the President under Section 3 of the National Industrial Recovery Act on April 13, 1934, regulated the live poultry industry in the New York metropolitan area, including provisions on hours, wages, labor conditions, and trade practices such as 'straight killing,' which prohibited selective purchasing from coops.

The petitioners were indicted on 18 counts for violating the Code and one count for conspiracy to violate it. They demurred to the indictment and moved during trial, arguing the Code resulted from an unconstitutional delegation of legislative power, improperly regulated intrastate transactions, and violated due process under the Fifth Amendment. Convicted in the District Court for the Eastern District of New York on all counts, the petitioners appealed. The Circuit Court of Appeals sustained convictions on the conspiracy count and 16 Code violation counts but reversed on the two counts related to wages and hours, finding them beyond congressional power. Both the petitioners (No. 854) and the Government (No. 864) sought review, and the Supreme Court granted writs of certiorari on April 15, 1935.

The specific convictions included violations for exceeding maximum hours and paying below minimum wages, permitting selective chicken purchases in violation of 'straight killing,' selling an unfit chicken, failing to comply with New York City inspection ordinances, making false reports or failing to report prices and sales volumes, and selling to unlicensed dealers.

Analysis

Issue #1

Issue

Did Section 3 of the National Industrial Recovery Act constitute an unconstitutional delegation of legislative power to the President?

Legal Rule

Article I, Section 1 of the Constitution vests all legislative powers in Congress, which may not abdicate or transfer essential legislative functions. Congress may delegate authority to make subordinate rules within prescribed limits and standards, but must establish policies and standards to guide such delegation to maintain the constitutional system.

Rule Analysis

Section 3 authorized the President to approve 'codes of fair competition' for trades or industries, proposed by associations or groups, provided they met certain conditions, and made violations misdemeanors in transactions affecting interstate commerce. The Act did not define 'fair competition' and referred to broad objectives in Section 1, such as removing obstructions to commerce, promoting industry organization, eliminating unfair practices, and rehabilitating industry.

This delegation lacked specific standards, allowing the President unfettered discretion to approve or prescribe codes encompassing any measures deemed beneficial for industry rehabilitation, without prescribed rules of conduct or administrative procedures akin to those in other valid delegations, such as the Federal Trade Commission Act. Comparisons to delegations in interstate commerce, radio, and tariff acts showed those provided detailed standards, expert bodies, and procedural safeguards, which were absent here.

The requirements for presidential findings—that proposing groups be representative and non-monopolistic, and that codes effectuate the Act's policy—were insufficient to limit discretion, effectively transferring legislative power to private groups and the President to enact laws for diverse industries.

Conclusion

Yes, Section 3 constituted an unconstitutional delegation of legislative power. The code-making authority conferred by the Act was invalid, rendering the Live Poultry Code provisions unenforceable.

Issue #2

Issue

Did the provisions of the Live Poultry Code, as applied to the petitioners' intrastate transactions, fall within Congress's power under the Commerce Clause?

Legal Rule

Congress may regulate transactions in interstate commerce and activities that directly affect it, but not intrastate transactions with only indirect effects, to preserve the distinction between national and state authority. Direct effects include those substantially burdening or interfering with interstate commerce, while indirect effects remain under state control.

Rule Analysis

The petitioners' purchases ended interstate commerce upon arrival in New York, with subsequent slaughter and sales to local retailers occurring entirely intrastate. The Code's wage, hour, and trade practice provisions governed these local operations, not the interstate transport or initial sales.

Unlike cases involving direct interference, such as conspiracies restraining poultry flow into New York or regulations essential to interstate rail efficiency, the effects here—on prices, competition, or market demoralization—were indirect, similar to local business impacts in other industries. Allowing federal control over such intrastate wages and hours would extend to all cost elements affecting prices, eroding state authority over internal commerce.

Arguments that national crises or diversion of commerce justified federal intervention could not expand constitutional powers, as the Commerce Clause does not authorize overriding state control of domestic labor conditions with merely indirect interstate effects.

Conclusion

No, the Code provisions did not fall within Congress's commerce power as applied to the petitioners' intrastate activities. The attempted regulation of hours, wages, and local sales was invalid, as these affected interstate commerce only indirectly.

Additional Opinions

Mr. Justice Cardozo: Concurrence

Justice Cardozo concurs in the judgment and result of the majority opinion, emphasizing that the delegation of legislative power in the National Industrial Recovery Act (NIRA) is excessively broad and lacks sufficient standards, likening it to an unconfined 'roving commission' to address economic evils without clear limits on means or occasions. He disagrees with the notion that the delegation is valid merely because it involves codes of fair competition, arguing that the Act allows for positive planning and improvements in industry welfare beyond just eliminating unfair practices, which constitutes an unlawful transfer of plenary power. Cardozo highlights that even if Congress had directly adopted the code, it would be invalid under the Commerce Clause, as it regulates intrastate activities like wages and hours that are not directly part of interstate commerce, rejecting a view of causation that blurs national and local distinctions. He notes that removing wage and hour provisions would destroy the code entirely, as they are essential to the statutory scheme, and states that Justice Stone joins in this opinion.