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business in a State except by the consent of the State ; that the State may exclude them arbitrarily or impose such conditions as it will upon their engaging in business within its jurisdiction. But there is a very important qualification to this power of the State, the recognition and enforcement of which are shown in a number of decisions of recent years. That qualification is that the State may not exact as a condition of the corporation's engaging in business within the limits that its rights secured to it by the Constitution of the United States may be infringed."
It must be kept in mind that a corporation created by one sovereignty does not possess the inherent right of a citizen to transact business or exercise business rights in another sovereignty. As stated in the recent case of Liberty Warehouse Co. v. Burley Tobacco Association, decided February 20, 1928 :
“A corporation does not possess the privileges and immunities of a citizen of the United States within the meaning of the Constitution.” (Citing cases.)
In Buffington v. Day (11 Wall. (U. S.) 113), the Supreme Couri said at page 124 :
“ The General Government, and the States, although both exist within the same territorial limits, are separable and distinct sovereignties, acting separately and independently of each other, within their respective spheres."
How can the State create an artificial person with the absolute right to exercise its corporate franchise under the National sovereignty? When Congress creates a corporation it may exercise its franchise within the borders of the State only when it is a Federal agency. In McCulloch v. Maryland (4 Wheat. 316) the State undertook to tax a branch of the United States Bank which had been chartered by Congress for governmental fiscal purposes. Chief Justice Marshall held that this could not be done as the bank was exercising its Federal agency within the Federal sovereignty. At page 410 he says:
“The certainty of a corporation, it is said, appertains to sovereignty. This is admitted. But to what portion of sovereignty does it appertain? Does it belong to one more than another? In America the powers of sovereignty are divided between the Government of the Union and those of the States."
Suppose, however, a corporation was created by Congress that was not an agency for carrying out some national end, but was a mere business corporation. Could it invade a State without submitting to the State power governing foreign corporations? By an act of Congress the National Life Insurance Co. was created. Indiana treated this company as a foreign corporation and required it to submit as such to certain conditions. And in Daly v. The National Life Insurance Co. (64 Ind. 1) the court said:
“ The appellee was not incorporated or organized in this State, but it was and is a corporation created by and under the laws of another Government, to wit, that of the United States. The appellee was incorporated by an act of the Congress of the United States, and its counsel claim that for this reason it is ‘governed by a law paramount to the laws of this State. The United States is a Government whose powers are limited by the Constitution of the United States. The Congress of the United States, in so far as it legislates for that Government, has neither the right nor the power to incorporate a' private corporation such as the appellee. In addition, however, to the power conferred upon Congress by the Constitution of the United States to legislate for that Government, it is expressly provided in that instrument that the same Congress shall have power To exercise exclusive legislation, in all cases whatsoever, over such district (not exceeding ten miles square) as may, by cession of particular States and the acceptance of Congress, become the seat of the Government of the United States. Under this provision of the Constitution the Congress became and was the local legislature of the District of Columbia, and as such, and as such only, it had the right and the power to provide for the incorporation of a private corporation, such as the appellee, within and for said District. Although the statute under which the appellee became incorporated was enacted by the Congress of the United States, yet in its enactment Congress was acting, and could only act, as the Legislature of the District of Columbia ; and under this statute the appellee became and was a corporation not of the United States but of said District."
A citizen has the right to transfer himself and his activities from one State to another and to do business in any State. This is not true of a corporation. A State can not by creating a corporation endow it with the right to transact interstate commerce. The artificial person created by the State is as much a foreign corporation to the national sovereignty as it is foreign to, the sovereignty of another State; and when it undertakes to exercise a franchise under the national sovereignty it becomes subject to license and regulation, if Congress sees fit to require such license and regulation.
The right of Congress to regulate commerce applies to natural as well as artificial persons. But the right to admit or reject license or regulate artificial persons created by Sta’es that seek to function under national sovereignty arises out of the inherent nature of sovereignty. The power of Congress over such artificial persons is not to be measured by its power over natural persons.
The bill is drawn upon the above theory of the law and can only be discussed intelligently upon that theory.
SUBJECT MATTER OF THE BILL
The bill is confined to corporations engaged in mining and shipping coal in interstate and foreign commerce. It does not touch the corporation engaged simply in mining coal. It does not affect the individual (natural person) with this exception: Section 2 permits marketing pools by such corporations for the purpose of agreeing on prices; but any individual shipper may join such pool upon the same terms that a corporation may. The bill does not require the individual to do this but permits him to do so, in order that there may be no claim that the individual was discriminated against in the allowonce of such marketing pools. Apart from this instance in which the hand of Congress is not laid upon the individual but simply holds the door open for him, there is no reference to the rights of natural persons. The remainder of the bill deals with corporations engaged in shipping coal in two groups: (1) If any of these corporations are seeking new privileges in connection with their interstate commerce by creating marketing pools or mergers, they are required to take out a primary license and submit to certain regulations. (2) If any of these corporations have been shipping coal before the act goes into effect and desire no new privileges in connection with their interstate commerce, they are required to take out a secondary license and submit to four conditions, all of which are lawful and reasonable and none of which infringe upon their constitutional rights.
The fact that a foreign corporation has been admitted to do business in a State does not prevent that State from later excluding or requiring it to be licensed and regulated. And since the power of the national sovereignty must be analogous to that of State sovereignty, Congress has not lost the right to regulate and impose conditions upon corporations that have heretofore been allowed, without regulation or license, to ship coal in interstate commerce. But it is apparent that this bill has been drawn with a tender regard for corporations that are engaged in interstate commerce in coal at the time the law goes into effect.
It may be asked, will the regulation of corporations engaged in interstate commerce in bituminous coal meet the situation? A careful survey discloses that substantially all, if not all, of such business is carried on by corporations. The nature of these enterprises requires large capital investments which lead to corporate forms; and is impelled to this resort by the hazard--both in operating and marketing—that recommend corporations as the prudent method of capital investment. The law that regulates such corporations will effectively accomplish the end sought.
The advantages that will occur to the primary licensees will soon result in all mining enterprises asking for a primary license. We have no fear in that regard. One can take Section 7 of the bill and readily see that the Government service to such licensee will bring all companies under its provisions. But it still remains that if any existing companies decline to accept a primary license, they can only be required to take out the secondary license whose conditions do not infringe upon their constitutional rights.
OBJECTION THAT THE BILL IS CLASS LEGISLATION
The first objection to the bill is that it deals only with bituminous coal “ And does not affect any fuel such as gas, natural or artificial, fuel oils, or any other fuels with which bituminous coal must compete"; that it is therefore class legislation and would be void as such.
The only ground for attacking congressional legislation as class legislation is the limitation of the fifth amendment providing for equal protection of the laws. This section, and the fourteenth amendment containing a similar provision relating to State legislation, has been construed in many cases. And it all of them the law has been sustained if the court found that there was a reason for the classification and that it was not a mere arbitrary one. A de cision directly in point is Heisler v. Thomas Colliery Co. (260 U. S. 245.) In that case the General Assembly of Pennsylvania had imposed a special tax of 242 per cent on anthracite coal as and when prepared for the market. The Supreme Court said at page 254:
“ The bill in the case, as far as we are concerned with it, assails the act of 1921 as offensive to the fourteenth amendment of the Constitution of the United States in that it denies to the Thomas Colliery Co., and other owners and operators of anthracite mines, the equal protection of the laws, because it taxes such owners and anthracite coal and does not tax the owners of bituminous mines and bituminous coal. The ultimate foundation of the contention is that anthracite coal and bituminous coal are fuels and necessarily, therefore, must be associated in the same class for taxation in disregard or in diminution of whatever other differences may exist between them in composition, qualities, or uses, and that not to so associate them is arbitrary and unreasonable, having the consequences of inequality and illegality, and, therefore, within the ban of the Constitution of the United States.
“The contention, therefore, concentrates attention upon the consideration of what resemblances or differences in objects justify their inclusion in, or their exclusion from, a particular class.
" It would be commonplace and wearisome to enlarge much upon the principle that presides in and determines the classification of objects. It is too necessary and too familiar in the affairs of life. We can not go far in thought or practice without its exercise. It is the process of considering objects together or in separation, as determined by their properties or some of them, and the purpose we have in hand. If the properties and purpose have relation, the process is logically justified.
“ Illustrations readily occur. A farmer will classify plants differently from a botanist, but the classification of both may, notwithstanding the difference, be logically proper.
"And so classification has uses in government–indeed, we may say, necessitates in government-for government as well as persons has purposes, varied and at times exigent, and its legislation must be accommodated to them, either in convenience or necessity.
“ In Watson v. State Comptroller (254 U. S. 122, 65 L. ed. 170, 41 Sup. Ot. Rep. 43), it is said : “Any classification is permissible which has a reasonable relation to some permitted end of governmental action.
It is enough, for instance, if the classification is reasonably founded in poses and policy of taxation." ; In other cases it is said that facts which can be reasonably conceived of as having existed when the law was enacted will be assumed to justify it. (Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 78, 55 L. ed. 369, 377, 31 Sup. Ct. Rep. 337, Ann. Cas. 1912C, 160; Crescent Oil Co. v. Mississippi, 257 U. S. 129, 137, 66 L. ed. 166, 42 Sup. Ct. Rep. 42.) And it makes no difference that the facts may be disputed or their effect opposed by argument and opinion of ser ous strength. It is not within the competency of the courts to arbitrate in such contrariety. (Rast v. Van Deman & L. Co., 240 U. S. 342, 237, 60 L. ed. 679, 687, L. R. A. 1917A, 421, 36 Sup. Ct. Rep. 370, and cases there cited.) And, further, the purpose of the legislation may not be the correction of some definite evil, but may be only to remove * obstacles to a greater public welfare." See also, as to classification by legislation and its consonance to the requirements of the fourteenth amendment (District of Columbia v. Brooks, 214 U. S. 138, 150, 53 L. ed. 941, 945, 29 Sup. Ct. Rep. 560).'”
Classifications have been sustained dealing differently or separately with professions. Also with the rights of property under zoning ordinance (Gorisb v. Fox, 274 U. S. 604) ; regulation of hours of labor for women in cities of certain classes (Radice v. New York, 264 U. S. 292); also regulating hours of labor for women in hotels, but omitting boarding houses and lodging houses (Miller v. Wilson, 236 U. S. 382); and in numerous other cases. The discussion of Justice Hughes in the Radice case is illuminative :
“ The contention as to the various omissions which are noted on the objections here urged ignores the well-established principle that the legislature is not bound, in order to support the consitutional validity of its regulation, to extend it to all cases which it might possibly reach. Dealing with practical
exigencies, the legislature may be guided by experience. (Patsone v. Pennsylvania, 232 U, S. 138, 144,:58 L. ed. 539, 544, 34 Sup. Ct. Rep. 281.) It is free to recognize degrees of harm, and it may confine its restrictions to those classes of cases where the need is deemed to be clearest. As has been said, it may 'proceed cautiously, step by step,' and ' if an evil is specially experienced. in a particular branch of business' it is not necessary that the prohibition. * should be couched in all-embracing terms.' (Carroll v. Greenwich Ins. Co., 199 U. S. 401, 411, 50 L, ed. 246, 250, 26 Sup. Ct. Rep. 66.) If the law presumably hits the evil where it is most felt, it is not to be overthrown because there are other instances to which it might have been applied. (Keokee Consol. Coke Co. v. Taylor, 234 U. S. 224, 227, 58 L. ed. 1288, 1289, 34 Sup. Ct. Rep. 856.) Upon this principle, which has had abundant illustration in the decisions cited below, it can not be concluded that the failure to extend the act to other and distinct lines of business, having their own circumstances and conditions, or to domestic service, created an arbitrary discrimination as: against the proprietors of hotels.”
It ought to be apparent that if Congress may deal with this subject, its legislation would not be a denial of the equal protection of law. If anything is plain it appears from the report of the United States Coal Commission, the investigation made by the Senate committee, the concensus of all economists and the admission even of counsel for the operators, that the bituminous-coal industry occupies an isolated position peculiar to itself. That its capital. structure is being destroyed, its labor wage shamefully deflated, that communi-ties depending on it are pauperized; that it is the scene of violent labor disputes, the victim of unprecedented cut-throat competition, the cringing prey of the railroad and public utilities; and that, in the final effort to survive, it is wasting 40 per cent of the coal it mines.
It has not been argued but may be later urged, that the bill provides for class legislation because it deals only with corporations. The answer to that is found in the quotation before made from the Hammond Packing Company v. Arkansas (212 U. S. 322 (supra)). In that case the act was attacked! because it affected foreign corporations without affecting individuals. The court, at pages 343 and 344, stated :
“Although it be conceded that the provisions of the statute can not, consistently with constitutional limitations, be applied to individuals, such concession would not cause the act to amount to a denial of the equal protection of the laws. The difference between the extent of the power which the State may exert over the doing of business within the State by an individual and that which it can exercise as to corporations furnishes a distinction authorizing a classification between the two. It is apparent that the court below, both in the Hartford case and in this, by a construction which is here binding, treated the statute, in so far as its prohibitions were addressed to individuals, as sep arable from its requirements as to corporations, and, therefore, even though there was a want of constitutional power to include individuals within the prohibitions of the act, that fact does not affect the validity of the law as to corporations."
It is objected “that Congress has no power to forbid interstate commerce in bituminous coal, because it is not impressed with a public use., * * * A more complete deprivation of the right of freedom of contract than this proposed legislation entails can hardly be conceived. One who produces coal can not sell at all until he has a permit setting out the conditions under which he may sell or the territory in which he may sell, and the price he may charge." It will be interesting to know what sections of the bill are regarded as creating this situation. There is no restraint upon the secondary licensee except the four conditions which will be hereafter considered. They do not relate to prices or markets,
It is provided that if corporations desire to form marketing pools or to merge their properties they should be required to take out a preliminary license and submit to some supervision by the commission with respect to the prices they charge and the markets they serve. But these conditions are imposed only to safeguard the public welfare if advantage is taken of the opportunity granted by the bill of forestalling the market. It is admitted by all that the coal market is a chaos to which some relief might be granted by permitting combinations to agree upon prices. The bill simply establishes two general checks upon this permisaion, one with relation to prices and the other with relation to wages.
The first check arises out of the investigation which the commission may make of the cost of such marketing pool, with the further guaranties of reasonable cost to the consumer by requiring direct selling agencies, thus limiting the spread of profits which is the admitted disgrace of the coal market. The other check is in providing that the members of such pools and mergers shall give their employees the right to deal collectively with them in the matter of their wages. In so far as a maximum price is fixed, it is obvious that no minimum price is required, and the maximum price is subject to court review.
Furthermore, not only are the Sherman and Clayton Acts set aside, but be commission is empowered in various ways to stabilize, encourage, and promote the business of these primary licensees. No corporation shipping cual is obliged to join these pools or mergers.
If it be said that there could be certain mergers now without violating the Sherman Act, because within the rule of reason the obvious answer is that Congress is not limited by the Sherman Act, but can amend it, enlarge it, or repeal it. For many years, and until the Standard Oil case, it was held that the Sherman Act prevented any combination that tended to lessen competition. Congress in its control of interstate commerce can extend the scope of the Sherman Act or can restrict it or remove it. In the packers and stockyards act of 1921 Congress declared it was unlawful for packers to “sell or otherwise transfer to or for any other packer any article for the purpose or with the effect of apportioning the supply in commerce between any such packers, if such apportionment has the tendency or effect of restraining commerce or of creating a monopoly in commerce
or engage in any course of business, or do any act for the purpose or with the effect of manipulating or controlling prices in commerce. etc."
In the stockyards act Congress applies a much stricter rule to the packers than the Sherman Act applies to business generally.
So Congress, having control over the subject of pools and mergers and combinations, can meet the situation in the bituminous-coal industry by granting certain privileges for the purpose of limiting competition ; but it certainly can surround that privilege with appropriate conditions.
Brief of opponents say “his prices must be uniform over the State, save in so far as affected by freight rates. Local conditions or other considerations which might call for a difference in prices at different localities can not be considered. He can make no better prices to quantity purchasers than to the smallest con
If he operates in several localities he can not change his prices in one without making a similar change in every other."
This seems to have been written in utter ignorance of the bill. In the first place, the bill does not deal with individuals but with corporations. In the second place, there is no pretense of regulating prices within the State. In the third place, there is no effort to regulate prices unless the corporation desires to form a marketing pool or merger with other corporations. In the fourth place, if à corporation has mines in different mining fields, they can join separate marketing pools and they do not have to have uniform prices in such cases. This hodgepodge of criticism betrays a curious misunderstanding and is predicated upon a curious misstatement of the bill.
With reference to the maximum price it may be interesting to note that the Packers and stockyards act permits the Secretary of Agriculture to fix the maximum charge of commission men at the stockyards, and in a decision at Omaha, reported December 19, 1928, three Federal judges sitting, the court upheld the authority of Secretary Jardine in fixing such commission.
Opponents of the bill finally say in their brief :
" The proposed bill in this case violates the liberty of contract guaranteed by the Constitution in another important phase other than above mentioned. The ultimate result of this legislation is to compel all men engaged in mining coal to become members of the United Mine Workers of America and encourage the breaking of private contracts with their employers. A man who desires to engage in mining coal would of necessity and as a condition precedent to his securing employment have to join this union. This is a clear invasion of his constitutional right."
This statement is wholly unwarranted by the provisions of the bill. In section 7 the primary licensee (these corporations forming marketing pools or mergers or exercising new rights as artificial persons) are directed-as their employees are“ to exert every reasonable effort to make and maintain agreements concerning wages; and it is further provided :
" In the making of such agreements the licensees may negotiate through an operators' association and the employees shall be entitled to deal collectively by