298 U.S. 238 (1936)
Congress enacted the Bituminous Coal Conservation Act of 1935, which imposed an excise tax of fifteen percent on the sale price of bituminous coal at the mine or its fair market value in the case of captive coal, payable monthly by producers.1
Section 2 of the Act establishes in the Department of the Interior a National Bituminous Coal Commission. The Commission is directed to formulate a Bituminous Coal Code containing detailed price-fixing provisions to be administered by twenty-three district boards.2
The labor provisions require collective bargaining, minimum wages, maximum hours, and other conditions.3 Producers who filed acceptance of the code and complied with it became entitled to a drawback credit of ninety percent of the tax.4
On August 31, 1935, the day after the Act took effect, stockholder Carter filed suit in the Supreme Court of the District of Columbia against the Carter Coal Company, its officers, Commissioner of Internal Revenue Helvering, and other federal officials, seeking to enjoin the company from accepting the code or paying the tax and to restrain federal officials from enforcing the Act.5 In the same court, a parallel stockholder suit sought a mandatory injunction compelling the company to accept and operate under the code.6
Two suits were filed in federal district court in Kentucky: one by producers to enjoin collection of the tax and one by a stockholder to compel the company to accept the code.7 The Supreme Court of the District of Columbia found that the production of bituminous coal is a local activity, that substantially all of the Carter Coal Company's output was sold f.o.b. mine and shipped in interstate commerce, and that interstate and intrastate distribution were inextricably connected.8
That court concluded the labor provisions were unconstitutional and separable from the price-fixing provisions, which it upheld, and denied most of the requested relief while granting a permanent injunction against collection of taxes accrued during the suit.9 The Kentucky district court upheld the Act in its entirety.10 Appeals were taken to the United States Court of Appeals for the District of Columbia and to the Sixth Circuit.11 Petitions for writs of certiorari were granted by the Supreme Court before those appellate courts heard the cases, owing to the importance of the questions and the need for speedy final determination.12
Whether stockholders have standing to maintain suits challenging the constitutionality of the Bituminous Coal Conservation Act of 1935?13
A stockholder may bring a derivative suit to enjoin corporate action that would violate the Constitution when a proper demand on the board has been made and refused and the suit is brought in good faith.14
Yes. In the Carter case the stockholder formally demanded that the board refuse to accept the code or pay the tax.15 The board considered the demand and decided to accept the code because the fifteen percent penalty on gross sales would be seriously injurious and might result in bankruptcy.16 The suit was brought in good faith.17 The right of stockholders to bring such suits under these circumstances is settled.18
The stockholders have standing to maintain the suits.19
Whether the suits challenging the Act were prematurely brought?20
A suit to enjoin enforcement of a statute is not premature when the injury is impending even if the statute has not yet been applied in practice.21
Yes. The Bituminous Coal Conservation Act of 1935 took effect on August 30, 1935.22 Stockholder Carter filed suit the following day in the Supreme Court of the District of Columbia.23 Section 2 of the Act required the President to appoint the National Bituminous Coal Commission.24
Section 4 required the Commission to formulate and promulgate the Bituminous Coal Code.25 Both requirements were mandatory. The fifteen percent exaction was definitely imposed by the statute and its collection was certain to ensue against all producers of bituminous coal.26
The suits were not prematurely brought.27
Whether the fifteen percent exaction imposed by the Act on the sale price of bituminous coal is a tax or a penalty?28
An exaction that is imposed to coerce compliance with regulatory provisions rather than to raise revenue is a penalty not a tax.29
Yes. The fifteen percent exaction applied to all producers of bituminous coal, whether sold in interstate commerce or used as captive coal.30 A ninety percent drawback credit was available only to producers who filed acceptance of the code and complied with its provisions.31 The structure of the exaction, with its substantial drawback conditioned on compliance, was designed to coerce submission to the regulatory scheme rather than to raise revenue.32
The fifteen percent exaction is a penalty not a tax.33
Whether the labor provisions of the Act, including those governing collective bargaining, wages, and hours, fall within Congress's power to regulate interstate commerce?34
Congress may regulate only activities that directly affect interstate commerce; production of coal is a local activity whose effect on commerce is indirect even when the coal is later shipped interstate.35
No. The Carter Coal Company produced coal entirely within West Virginia.36 The production occurred before any interstate movement began.37 The labor provisions regulated wages paid to miners, hours of labor, and collective bargaining at the mine sites.38 These matters constituted local production activities whose effects on interstate commerce, if any, were indirect and remote.39
The labor provisions do not fall within Congress's power to regulate interstate commerce.40
Related opinions on this issue
Joined by Mr. Justice Brandeis And Mr. Justice Stone
Justice Cardozo dissented on the commerce power issue.41 He maintained that the production of bituminous coal is a national industry.42 The conditions in the coal fields have a direct and immediate effect upon interstate commerce.43
Strikes, stoppages, and labor disputes in the coal industry have in the past paralyzed interstate commerce.44 The evils sought to be remedied by the act are national in their scope and require a national remedy.45 The commerce clause is not to be construed in a narrow or pedantic manner.46
The power of Congress is as broad as the need.47 The distinction between direct and indirect effects upon commerce is not to be applied with mechanical precision.48 What is direct in one context may be indirect in another.49
The test is one of degree and of practical necessity.50 The labor provisions are appropriate means to the legitimate end of stabilizing an industry whose disorganization has disrupted the flow of interstate commerce.51
Whether subdivision (g) of Part III of the Code constitutes an unlawful delegation of legislative power?52
Congress may not delegate legislative power to fix wages and hours to private parties whose interests may be adverse to those of other producers and employees.53
Yes. Subdivision (g) delegated the power to set maximum hours to producers of more than two-thirds of national tonnage production together with more than one-half of the mine workers.54 It also delegated the power to set minimum wages to producers of more than two-thirds of district tonnage together with a majority of miners.55 The provision thereby subjected dissenters to the will of the majority whose interests may be adverse to those of other producers and employees.56
Subdivision (g) of Part III constitutes an unlawful delegation of legislative power.57
Whether the price-fixing provisions of the Act are constitutional and severable from the labor provisions?58
When labor and price-fixing provisions are mutually dependent and Congress would not have enacted one without the other the invalidity of the labor provisions renders the price-fixing provisions inoperative as well.59
No. The price-fixing provisions were interwoven with the labor provisions.60 Wages constitute approximately two-thirds of the cost of producing a ton of coal.61 The code required district boards to establish minimum prices so as to yield a return equal to the weighted average of total costs to stabilize wages, working conditions, and maximum hours.62 Because the two sets of provisions were mutually dependent, Congress would not have enacted the price-fixing provisions without the labor provisions.63
The price-fixing provisions are not severable from the invalid labor provisions and therefore fall with them.64
Related opinions on this issue
Joined by Mr. Justice Brandeis And Mr. Justice Stone
Justice Cardozo dissented on severability.65 He maintained that Part II establishing the price-fixing system is separable from Part III.66 The statute contains an express separability clause that reverses the presumption of indivisibility.67
The price provisions can operate independently to stabilize the industry even if the labor provisions never take effect.68 The labor provisions are themselves separated and placed in a separate part of the Code.69 The maximum hours of labor may be fixed by agreement between the producers of more than two thirds of the annual national tonnage production and the representatives of more than one half the mine workers.70
Wages may be fixed by agreement negotiated by collective bargaining in any district.71 It is possible that none of these agreements as to hours and wages will ever be made.72 In the meantime the provisions of Part II will be continuously operative and will determine prices in the industry.73
Plainly there was no intention on the part of the framers of the statute that prices should not be fixed if the provisions for wages or hours of labor were found to be invalid.74