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The power claimed rests upon the proposition stated by Mr. Warrum's brief, as follows:
Congress may require any State corporation desiring to engage in interstate «commerce to conduct its entire business on such terms as it sees fit to impose.
The reach and consequences of such a doctrine are almost beyond comprehension. Nearly every corporation, large or small, no matter in what business it may be engaged, either buys or sells in interstate commerce. Such purchases or sales in interstate commerce may be a large or small part of its business. But no matter how small a part of it may be, the right to engage in interstate commerce is usually essential to the business. Even a small corporation engaged in selling its product only within a certain city or even within a small neighborhood, will probably at some time during the course of its business find it necessary to engage in interstate commerce for the purpose of buying some part of its supplies or portions of the machinery or other equipment necessary to carry on its business. Therefore, if the right to engage in interstate commerce, either as a purchaser or a seller, can, as asserted, be conditioned on the requirement that the entire business be conducted on such terms as Congress sees fit to impose, then every minute detail of every business in the land so far as it is conducted by a corporation, may be made the subject of Federal supervision, regulation, and control.
Thus Congress could say to a corporation operating a corner bakery selling bread in its own immediate neighborhood, “ You can not have the privilege of buying your flour in interstate commerce or buying your mixing machines, baking ovens or other equipment in interstate commerce unless you make your bread with such and such a formula and sell the loaves at a designated price." Or a Federal commission could be established to supervise the bread baking of all corporations in the country which found it necessary to buy or sell in interstate commerce, however small a part of their business such commerce might be. In like manner Federal commissions could be established to regulate and control all manner of industry and trade to the extent that it was carried on by corporations and the minutest detail of the business would become subject to the supervision of such commission. Under this principle, Congress could go even further and place a Federal manager in control of every corporation doing any business whatever in interstate commerce.
If the principle asserted by Mr. Warrum be correct, it is strange indeed that it had not been discovered many years ago. The use of the proposed method of regulation by imposing conditions upon the privilege of a State corporation engaging in interstate commerce could have avoided all difficulties on questions of Federal regulatory power. There would have been no occasion for the many volumes of opinions written on the subject. All doubt as to Federal power over corporations engaged in interstate commerce in any part of their business could have been at once resolved in favor of the existence of Federal power on the asserted principle that Congress may require, as a condition to engaging in interstate commerce, that a corporation conduct its business on such terms, however, arbitrary, as the Congress. sees fit to prescribe.
But the proposition stated by Mr. Warrum is not advanced here for the first time. The same principle was advanced in support of other legislation, notably the child labor acts and the first employers' liability act. In the cases relating to those statutes, the Supreme Court refused to accept the broad proposition of Federal power here advanced and expressly held that the Federal Government could not constitutionally extend its control to matters of local business which did not constitute interstate commerce simply because the corporation was engaged in interstate commerce or as a condition to conducting such commerce,
In attempting to control the employment of child labor, the Congress first enacted a statute (act of September 1, 1916, 39 Stat. 675) prohibiting the transportation in interstate commerce of goods made at a factory in which within 30 days prior to their removal, children under the age of 14 years had been employed or children between the ages of 14 and 16 years had been permitted to work during other than prescribed hours. In the case of Hammar v. Dagenhart (247 U. S. 251) the Supreme Court held that statute unconstitutional on the ground that it was an invasion by the Federal Government of the field exclusively reserved to the regulatory power of the State.
Explaining the reason for its decision, the court said: The grant of power to Congress over the subject of interstate commerce was to enable it to regulate such commerce, and not to give it authority to control the States in their exercise of the police power over local trade and manufacture.
The grant of authority over a purely Federal matter was not intended to destroy the local power always existing and carefully reserved to the States in the tenth amendment to the Constitution (pp. 273-274).
The control by Congress over interstate commerce can not authorize the exercise of authority not entrusted to it by the Constitution. (Pipe Line cases, 234 U. S. 548, 560.) The maintenance of the authority of the States over matters purely local is as essential to the preservation of our institutions as is the conservation of the supremacy of the Federal power in all matters entrusted to the Nation by the Federal Constitution.
In interpreting the Constitution it must never be forgotten that the Nation is made up of States to which are entrusted the powers of local government. And to them and to the people the powers not expressly delegated to the National Government are reserved. (Lane County v. Oregon, & Wall. 71, 76.) The power of the States to regulate their purely internal affairs by such laws as seem wise to the local authority is inherent and has never been surrendered to the General Government. (New York v. Miln, 11 Pet. 102, 139; Slaughter House cases, 16 Wall. 36. 63; Kidd v. Pearson, supra.) To sustain this statute would not be in our judgment a recognition of the lawful exertion of congressional authority over interstate commerce, but would sanction an invasion by the Federal power of the control of a matter purely local in its character, and over which no authority has been delegated to Congress in conferring the power to regulate commerce among the States.
In our view the necessary effect of this act is, by means of a prohibition against the movement in interstate commerce of ordinary commercial commodies, to regulate the hours of labor of children in factories and mines within the States, a purely State authority. Thus the act in a twofold sense is repugnant to the Constitution. It not only transcends the authority designated to Congress over commerce but also exerts a power as to purely local matter to which the Federal authority does not extend. The far-reaching result of upholding the act can not be more plainly indicated than by pointing out that if Congress can thus regulate matters entrusted to local authority by prohibition, of the movement of commodities in interstate commerce, all freedom of commerce will be at an end, and the power of the States over local matters may be eliminated, and thus our system of Government be practically destroyed.
Following this decision, Congress enacted a statute imposing a tax upon any business employing child labor contrary to the conditions prescribed in the act. (Act of February 24, 1919; 40 Stat. 1138.) Those conditions were substantially the same as were prescribed in the first child labor act. That statute was likewise declared unconstitutional in the Child Labor Tax case (259 U. S. 20), decided May 15, 1922. In an opinion by Chief Justice Taft, the court said:
The case before us can not be distinguished from that of Hammer v. Dagenhart (247 U. S. 251). Congress there enacted a law to prohibit transportation in interstate commerce of goods made at a factory in which there was employment of children within the same ages and for the same number of hours a day and days in a week as are penalized by the act in this case. This court held the law in that case to be void.
In the case at the bar, Congress in the name of a tax which on the face of the act is a penalty, seeks to do the same thing, and the effort must be equally futile (p. 39).
In connection with the legislation relating to railway employers' liability, the court has also laid down the principle that a corporation by engaging in interstate commerce does not subject its business to Federal control or supervision. The first employers' liability act (act of June 11, 1906, 34 Stat. 232) applied by its terms to all employees of any common carrier engaged in interstate commerce regardless of whether the injury occurred while the employee was engaged in interstate commerce or in purely local commerce.
Answering the Government's contentions, Chief Justice White in delivering the opinion of the court in Employers' Liability cases (207 U. S. 463) said:
It remains only to consider the contention which we have previously quoted, that the act is constitutional, although it embraces subjects not within the power of Congress to regulate commerce, because one who engaged in interstate commerce thereby submits all his business concerns to the regulating power of Congress. To state the proposition is to refute it. It assumes that because one engages in interstate commerce he thereby endows Congress with power not delegated to it by the Constitution, in other words, with the right to legislate concerning matters of purely State concern. It rests upon the conception that the Constitution destroyed that freedom of commerce which it was its purpose to preserve, since it treats the right to engage in interstate commerce as a privilege which can not be availed of except upon such conditions as Congress may prescribe, even ‘although the conditions would be otherwise beyond the power of Congress. It is apparent that if the contention were well founded it would extend the power of Congress to every conceivable suhject, however inherently local, would obliterate all the limitations of power imposed by the Constitution, and would destroy the authority of the States as to all conceivable matters which from the beginning have been, and must continue to be, under their control so long as the Constitution endures. (Pp. 502–503.)
These cases clearly establish that the Federal Government does not possess any such power as that asserted in the claim that Congress may require any State corporation desiring to engage in interstate commerce to conduct its business on such terms as Congress sees fit to impose. As soon as Congress undertakes to impose terms which result in a regulation of matters within the exclusive jurisdiction of the State, the statute becomes unconstitutional because it exceeds the powers delegated to the Federal Government,
The pending bill undertakes to regulate the mining of coal and to control the relations of employer and employee while engaged in
that occupation. The regulation of the mining of coal and of the relations between employer and employee engaged in that business, a local business, are exclusively within the jurisdiction of the several States. The claimed power can not be sustained on the ground that a corporation by engaging in interstate commerce, subjects its business, local as well as interstate, to Federal supervision and control. The claimed power can not be sustained on the ground that Congress has the power to prescribe regulations of local business or of relations between employers and employees engaged in local business as a condition to the corporation engaging in interstate commerce. Both of these grounds were advanced in support of other legislation, notably the child labor and employers' liability acts, and both grounds have been repudiated by the Supreme Court. The cases which we have just cited constitute a complete answer to the proposition advanced by Mr. Warrum and they show beyond question that the bill pending before the committee is unconstitutional because it exceeds any power of regulation delegated to the Federal Government.
I will proceed, however, to a further analysis of Mr. Warrum's argument because it has been so stated that to some it might seem plausible notwithstanding the direct conflict between his conclusion and the Supreme Court's decisions in the child labor and employers liability cases which we have cited. We think a further analysis of the argument' will show that Mr. Warrum's conclusion rests upon false premises. As we read the argument it proceeds by analogy from the power of the State government over foreign corporations seeking admission to do business within the jurisdiction of the State. It is argued that corporations are artificial creations of the law and exist by legal right only in the sovereignty which creates them; that one State, as a sovereign, is under no obligations to recognize the corporations of other States and that a State may admit foreign corporations subject to license and impose upon them any restrictions or regulations, however arbitrary,
a condition to such admission. It is then argued that the National Government, as at attribute of national sovereignty, possesses a like power of licensing or regulating corporations when they seek to enter the field of interstate commerce.
Mr. Warrum's argument gives the impression, notwithstanding bis admissions of the existence of certain limitations to which we will refer later, that he advances in support of his conclusion as to Federal power two major propositions:
First, that a State has the absolute right to exclude any foreign corporation from its borders or to admit such foreign corporation to business within the State upon such conditions, however arbitrary, as the State sees fit to impose.
Second, that the Federal Government, as an attribute of national sovereignty, possesses the same power, within its exclusive jurisdiction, as is possessed by the several States within their respective jurisdictions and, therefore, the Federal Government, like the State government, has the absolute right to exclude any corporation from interstate commerce or to admit any corporation to interstate commerce upon such conditions, however arbitrary, as the Federal Government sees fit to impose.
The first proposition asserts that a State in the exercise of its sovereign power may impose upon a foreign corporation, as a condition to its admission to engage in local business within the State, any regulation, however arbitrary, which it sees fit to impose. If there be no limit to the power of the State in that regard, then the State of Iowa, for example, may impose upon a corporation of Illinois there engaged in the mining of coal, as a condition to its operation of a coal retail yard within
the State of Iowa, a complete scheme of regulation of the Illinois corporation, including not only its local retail business in Iowa over which, of course, it has power, but also its mining operations in Illinois and its interstate commerce in selling and shipping its coal to Iowa and to all other States to which the coal may be sent.
The second proposition asserts that the Federal Government in the exercise of its assumed sovereignty may impose upon a corporation, as a condition to its admission to engage in interstate commerce, any regulation, however arbitrary, which it sees fit to impose. If that be true, the Federal Government, as a condition to permitting this assumed Illinois corporation to engage in interstate commerce in the sale and shipment of coal from Illinois to Iowa and other surrounding States, may impose upon that corporation a complete scheme of regulation not only of its interstate commerce but also of its intrastate business in the mining of coal in Illinois and in the conduct and management of retail coal yards in Iowa.
Thus, Mr. Warrum's argument leads to the conclusion that the State through its power as a sovereign to impose conditions upon corporations seeking admission to do business within its borders may exercise a complete and exclusive control over all the affairs of the corporation, both local and interstate; and that at the same time, the Federal Government, through its power as an attribute of its alleged sovereignty to impose conditions upon corporations seeking admission to engage in interstate commerce, may exercise a complete and exclusive control over all the affairs of the corporation, both interstate and local. Manifestly the two propositions can not stand together; one destroys the other. Both the State and the Federal Government can not exclusively and simultaneously occupy the entire field. The conclusion to which the principles stated by Mr. Warrum inevitably lead proves the fallacy of the propositions advanced by him. It is self-evident that there must be limitations upon the State and upon the Federal Government as to the conditions which either may impose upon corporations engaging in business 'within their respective jurisdictions.
We submit that the correct rule is that a State can not impose any and every condition which it may see fit upon the right of a foreign corporation to engage in business within its borders and that the Federal Government can not impose any and every condition which it may see fit upon the right to engage in interstate commerce. As soon as the conditions imposed by either one transgress the limit of its authority and extend into the field exclusively under the control of the other the act becomes repugnant to the Federal Constitution, the supreme law of the land.
That this is so with respect to the Federal Government, we have already shown in the citation of the cases dealing with the child-labor and employers' liability statutes.