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free to join the union, and that this is a part of the constitutional rights of personal liberty and private property, not to be taken away even by legislation, unless through some proper exercise of the paramount police power."
And in Adair v. United States (208 U. S. 161), the Supreme Court held invalid an act of Congress prohibiting an agent or officer of an interstate carrier. having full authority from his principal, from attempting to discharge or discharging an employee of the carrier because of his membership in a labor organization,
Clearly, if Congress has no such jurisdiction over the terms of employment contracts entered into by interstate carriers, it has no authority such as is claimed over the terms of contracts between those engaged in the local operation of mining coal and their employees, and relating to the circumstances of the employment relationship in production alone.
4. One implied contention underlying the proposed legislation is that the congressional power to regulate interstate and foreign commerce is necessarily exhaustive and includes the power to determine what commodities may and may not be transported in interstate commerce. We had thought that the decision of the Supreme Court in the first child labor case (Hammer v. Dagenhart, 247 U. S. 251) settled that question beyond dispute. The court, speaking through Mr. Justice Day, in that case, said:
"In other words, the power is one to control the means by which commerce is carried on, which is directly the contrary of the assumed right to forbid commerce from moving and thus destroy it as to particular commodities. But it is insisted that adjudged cases in this court establish the doctrine that the power to regulate given to Congress incidentally includes the authority to prohibit the movement of ordinary commodities, and therefore that the subject is not open for discussion. The cases demonstrate the contrary. They rest upon the character of the particular subjects dealt with and the fact that the scope of governmental authority, State or National, possessed over them is such that the authority to prohibit is, as to them, but the exertion of the power to regulate."
And, again, in the child labor tax case (Bailey v. Drexel Furniture Co., 259 U. S. 20), Mr. Chief Justice Taft said, referring to the first child labor case:
" Yet when Congress threatened to stop interstate commerce in ordinary and necessary commodities, unobjectionable as subjects of transportation, and to deny the same to the people of a State, in order to coerce them into compliance, with Congress's regulation of State concerns, the court said this was not in fact regulation of interstate commerce, but rather that of State concerns, and was invalid. So here the so-called tax is a penalty to coerce people of a State to act as Congress wishes them to act in respect of a matter completely the business of the State government under the Federal Constitution. This case requires, as did the Dagenhart case, the application of the principle announced by Chief Justice Marshall in M'Culloch v. Maryland (4 Wheat. 316, 424, 4 L. ed. 579, 605), in a much-quoted passage:
* Should Congress, in the execution of its powers, adopt measures which are prohibited by the Constitution, or should Congress, under the pretext of executing its powers, pass laws for the accomplishment of objects not intrusted to the Government, it would become the painful duty of this tribunal, should a case requiring such a decision come before it, to say that such an act was not the law of the land.'"
5. Whether or not Congress may exercise a greater regulatory power over corporations than over individuals engaged in interstate commerce, is another important question raised by the bill. The contention of advocates of the bill is that while an individual may have a right to engage in interstate commerce, a corporation, being merely a creation of the law, may engage in interstate commerce only as a matter of privilege; that it exercises its functions only by the will of the sovereign. In this connection, the language of Mr. Justice Jackson, in the case of In re Green (52 Fed. 104), is very enlightening. It is equally apt in considering the alleged power of Congress to fix maximum prices of commodities shipped in interstate commerce:
“ Congress may place restriction and limitations upon the right of corporations created and organized under its authority to acquire, use, and dispose of porperty. It may also impose such restrictions and limitations upon the citizen in respect to the exercise of a public privilege or franchise conferred by the United States. But Congress certainly has not the power or authority under the commerce clause, or any other provision of the Constitution, to limit and
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restrict the right of corporations created by the States, or the citizens of the States, in the acquisition, control, and disposition of property. Neither can Congress regulate or prescribe the price or prices at which such property, or the products thereof, shall be sold by the owner or owners, whether corporations or individuals."
While the law recognizes in many ways the distinction between individuals and corporations, there is no basis in reason or adjudicated law, for recognizing any distinction which leads to the result that while individuals are constitutionally protected in their ownership, use, and enjoyment of property, corporations, being merely aggregations of individuals associated for common objects, are not “persons " within the terms of the Constitution forbidding the deprivation of property without due process of law, and similar provisions.
An examination of the cases in which distinctions have been made between individuals and corporations discloses that they were all cases where the rights involved were peculiarly personal, such as political rights attaching tu individual citizenship.
But the Supreme Court of the United States has held that a corporation will be treated, where contracts or rights of property aie to be enforced against it. as a “citizen " of the State under the laws of which it is created, within the clause of the Constitut.on extending the judicial power of the United States to controversies between citizens of the different States. (Mississippi and R. River Boom Co. v. Patterson, 98 U. S. 403.)
And corporations are “ persons " within the meaning of the constitutional provisions (fifth and fourteenth amendments) forbidding the depr.vation of property without due process of law, as well as the provision against denial of the equal protection of the laws. (Covington and L. Turnpike Road Co. v. Sanford, 164, 164 U. S. 578.)
They are entitled to the same protection as natural persons in their right to be immune from unlawful searches and se zures. (Silverthorne Lumber Co. v. U. S., 251 U. S. 385; American Tobacco Co. v. Federal Trade Commission, 264 U. S. 298; Baltimore Grain Cases, 267 U. S. 586.)
6. Special attention should be called to one provision of the pending bill, which provides that the commission established is authorized to require corporations entering a merger or combination to establish and maintain retail-selling facilities at such places as the commission sees fit.
This means that a State is, by operation of this power, deprived of the right to exclude a foreign corporation from doing a local business; and, on the other hand, that the corporation is deprived of its property without due process by being arbitrarily subjected to the taxing and regulatory authority of States other than that of incorporation. Thus, Congress, if it should pass the proposed bill, would be undertaking to fix the domestic policies of the several States in a matter over which they have exclusive jurisd'ction and this invasion of the sovereignty of the States, in our opinion, leaves no room for doubt as to the unconstitutionality of the pending bill.
7. While the foregoing considerations are important, and some of them are compelling, we believe that a primary objection to which the bill is open is the following: The commission created by the bill is empowered, under section 5 to fix maximum prices to be charged by members of selling pools, mergers, combinations and consolidations. If the price fixed is considered unreasonable and confiscatory by the seller, he is given a statutory right to have the action reviewed by a Federal court.
But suppose that the offense of the commission lay, not in fixing a maximum price so low as to be confiscatory as to the seller, but in fixing one so high as to be unreasonable as to purchasers of coal. The bill makes no provision cither. (a) that consumers of coal may initiate a proceeding before the commission to have existing maximum prices modified; or (b) that consumers may intervene to protect their rights in a commission proceeding or in a court proceeding under section 5.
It is apparent, even from a casual examination of the bill. that it has been drafted without regard to the rights of the consuming public. Is it not clear that consumers of coal have a right to purchase coal at a price to be fixed by private contract? Is the public interest satisfied by an arrangement which may, in its hypothetical operation, placate both employers and employees engaged in the mining and shipment of bituminous coal, without regard to its effect upon the great body of unorganized patrons of the industry.
It follows inevitably, if the principle of control asserted by this bill be constitutional, that Congress may regulate, by a threatened denial of the facili
ties of interstate commerce, the conditions under which any commodity, whether of the mine, the forest, the factory, or the farm, shall be produced, or fabricated into useful form. It would be the longest step yet suggested for the destruction of local self-government and the establishment of Federal domination in most objectionable form.
For these and other considerations, both of law and policy, we oppose the pending bill and respectfully urge that the committee do not report it to the Senate of the United States, or, if it shall report it, that it do so unfavorably. Respecfully submitted.
JAMES A. EMERY, General Counsel,
JOHN C. GALL, Associate Counsel,
United States of America. Mr. GALL. Mr. Chairman, with your permission I should like also to present a brief in behalf of the American Wholesale Coal Association, Mr. Cochran could not be here this morning and asked me to present it.
Senator COUZENS. Very well; that may be made a part of the hearing.
Mr. GALL. It is as follows:
The American Wholesale Coal Association is a voluntary association consisting of corporations, partnerships, and individuals engaged in the buying and selling of coal and coke at wholesale. It is incorporated under the laws of the State of Illinois, and has membership in 22 States and the Dominion of Canada.
It subscribes to most of the objections to this bill that have been directed to the attention of the committee, but feels that it should briefly indicate a few particulars which it does not believe have been hitherto presented.
The bill seeks to create three separate and distinct classes of producers and distributors in the industry :
1. Corporations, firms, and individuals who may under the terms of the bill create marketing pools and cooperative selling associations.
2. Corporations who desire to operate under the secondary license feature of the bill, and who do not desire to become members of pools or cooperative selling agencies.
3. Individuals and partnerships engaged in the production or marketing of bituminous coal, who are required neither to affiliate with such pools or associations nor to be licensed as a condition precedent to transacting business.
These three classes of producers and merchants may, and in all probability will, be in active competition each with the other. Two operating under widely different degrees of regulation and one under none whatever.
Obviously, no control can be exercised under this bill over the actions of those in the industry who fall within the third class. Hence no solution of the fundamental problems may be expected to flow from the enactment of this measure.
Under such conditions one of two results will obtain. Either the prices fixed and determined by the pools or associations will become the generally established price of the industry, or those not affiliated with pools and mergers and required to have secondary licenses or no license at all will dictate a price scale which the pools and mergers must meet.
Assuming for the purposes of this discussion that human cupidity would impel all those in the industry to trade in the coal markets on the precise price levels determined by the pools and mergers or the commission, the legislation is still obnoxious and not in the public interest. Its tendency would be to fix prices at a substantially higher level than the present market scale. There can be no quarrel with this alone, as undoubtedly the prices at which coal is being sold to-day are at or below the production costs.
The very method of price determination sought to be imposed by the bill seems to violate the rights of one part of that great body of citizens known as the public, and that part is the consumers of the coal.
Section 5 of the bill provides: “At any hearing to fix or change maximum prices, the members of such marketing pools and selling associations, or such merger, consolidation, or combination shall be heard through their counsel or representative of their own choosing, and the mine workers shall likewise be herd through their counsel or chosen representative."
The bill seems to assume that the members of the merger or association and the mine workers are the only persons entitled to any consideration whatever in the fixing of prices at which the public may buy coal. No provision is made for any consumer to be heard in person or by counsel at any hearing having for its purpose the determination of maximum prices to be charged by such merger.
Any licensee is given the right to appeal to a district court of the United States if he should feel that prices fixed are unreasonable and confiscatory. No provision is made for an appeal to such a court if a member of the pool should feel that the prices set are too high. No provision is made which permits the consumer or any other party at interest to challenge the reasonableness of the prices fixed by the commission or by the mergers or pools. Consumers are without any substantial guarantee of honesty, economy, and efficiency in the operation of such properties, and without redress in the courts against the exaction of prices which they deem unreasonable.
The bill deprives the consuming public of the right of trading in this commodity at arms' length, prevents prices normally dictated by market conditions, and does not guarantee, as in the case of public-service corporations, that coal can be bought when needed. The bill imposes no obligation upon such merger or pool to produce coal at all or to sell coal at uniform prices to all who desire to purchase.
A consumer may not demand to be served at equal terms with all others. The pools and mergers may still select their customers and decline to serve for any reason or no reason.
Section 7 provides, “* * * The commission shall study and encourage the economic distribution of markets between said licensees * * *." Here we have allocation of territory. Once the territory is allocated, and the prices are set, where does the consumer stand? He must meet the demands as to price set by the mergers, pools, or the commission however unreasonable it may appear to him, without the opportunity of being heard when such price is fixed, or on appeal after they are fixed. His only alternative is the use of substitute fuels.
The dangers to the public exceed the purported benefits to the industry.
The members of the American Wholesale Coal Association are quite as much the purchasinng agents of the consumers they serve as the sales agents of the operators whose product they market. They are interested in doing justice on both sides. Their business is to sell the coal produced at a price returning the operator something more than mere cost of producton, and on the other hand to see that their customers are served at prices which are not unreasonably high. This they can not do under such a system of regulation.
On behalf of the public interest which our members serve, we ask that this be made a part of the record in these hearings. Respectfully submitted.
AMERICAN WHOLESALE COAL ASSOCIATION,
Commissioner, Washington, D. C. Senator COUZENS. You may proceed, Mr. Warrum.
STATEMENT OF HENRY WARRUM, COUNSEL FOR UNITED MINE
WORKERS OF AMERICA, INDIANAPOLIS, IND.
Mr. WARRUM. Mr. Chairman, at the conclusion of the hearing in December, we were furnished with a brief that we understood would represent the objections of the opponents of the bill, at least those who had participated in the hearings before the committee last year, and having that brief during the holiday adjournment we prepared a brief which I should like to hand to the chairman.
Senator COUZENS. That may be made a part of the record.
In the brief handed us by counsel for opponents of the bill, there seems to be a studied attempt to avoid discussing the real question involved.
This bill deals exclusively with corporations engaged in shipping coal in interstate commerce and is predicated on the power of Congress to license and regulate such corporations. The bill does ot affect corporations that are engaged simply in mining coal. It does not regulate or license individuals engaged in either mining or shipping coal.
An examination of the brief that we submitted when the bill was offered will disclose abundant authority for Congress to license and regulate corporations created by States, which assume to exercise franchises and privileges under the national sovereignty. A corporation is an artific al person which can have no legal existence out of the boundaries of the sovereignty by which it is created.” (Bank v. Earl, 13th Pet. (U. S.) 519, p. 538.) And the corporation created by one State has no right thereby to operate under another sovereignty. (Paul v. Virginia, 8 Wall. 168; McCulloch v. Maryland, 4 Wheat. (U. S.) 316, p. 410.) In Hammond Packing Co. v. Arkansas (212 U. S. 322) the following from the syllabus succinctly states the law :
* The right of a State to prevent foreign corporations from continuing to do business within its borders is a correlat.ve of its right to exclude them therefrom; and, as the power is plenary, the State, so long as no contract is impaired, may exert it from consideration of acts done in another jurisdiction.
"The difference between the extent of power which the State may exert over the doing of business within its borders by an individual, and that which it can exercise as to corporations, furnishes a distinction authorizing a classification between the two which does not violate the equal-protection clause of the fourteenth amendment.”
There are but two limitations upon this right: (1) If the corporation created by one State desires to transact interstate commerce in another State it can not be deprived of that right by the latter State, for the reason that this is a matter within the control of the national sovereignty. But this very limitation illustrates the distinction between the State and national sovereignties in their relation to these artificial persons—corporations. The States have surrendered a portion of the sovereignty to Congress, including the sovereign right to exclude a foreign corporation or to license and regulate it, with respect to interstate commerce. Certainly that right which in absence of the Federal Constitution would rest in the State, must rest in Congress. It can not be said that sovereignty in this respect has been lost to the people. In other words, the right that a State has to license, regulate, or exclude an insurance company or other business corporation, created by another State, measures the right that Congress has to license and regulate a corporation created by a State which assumed to exercise franchises and rights under national sovereignty.
If we find a multitude of these artificial persons created by States, indulging in interstate commerce without license or regulation, it is because the failure of Congress to license or regulate them has been regarded as an implied recognition of their existence and consent to their operations. As stated in the famous Northern Securities Co. case in 1904 (193 U. $. 345) :
* No State can, by merely creating a corporation, or in any other mode, project its authority into other States and across the continent so as to prevent Čongress from exercising the power it possesses under the Constitution over the interstate and international commerce, or so as to exempt its corporation engaged in interstate commerce from obedience to any rule lawfully established by Congress for such commerce."
And in a subsequent case (Hale v. Henkle, 201 U. S. 43, 75) the Supreme Court declared that franchises granted to a corporation by a State “so far as they involve questions of interstate commerce, must be exercised in subordination to the power of Congress to regulate such commerce, and in respect to this the general Government may assert a sovereign authority to ascertain whether such franchises have been exercised in a lawful manner, with due regard to its own laws.
The powers of the general Government in this particular in the vindication of its own laws are the same as if the corporation had been created by act of Congress."
The second limitation upon the right of either a State or of Congress to condition acceptance of a foreign corporation, is that the condition shall not deprive the corporation of any constitutional rights. In Hanover Fire Insurance Co. v. Carr (272 U. S. 494) the court sa'id :
" It was settled in Bank of Augusta v. Earle, 13 Pet. 519, 10 L. ed. 274; Paul v. Virginia, 8 Wall. 168, 19 L. ed. 357; Ducat v. Chicago, 10 Wall. 410, 19 L. ed. 972, and Horn Silver Mining Co. v. New York, 143 U. S. 305, 36 L. ed. 164, 4 Inters. Com. Rep. 57, 12 Sup. Ct. Rep. 403, that foreign corporations can not do