« PreviousContinue »
state commerce. l'pon this principle of law, a fortiori, Congress has the right to regulate such corporations; and the scope of the regulations must rest within congressional discretion, if any such regulation does not deprive the corporation of a constitutional right.
In a concurring opinion (Hale v. Henkel) Justice McKenna tersely summarized the decision as follows:
“ By virtue of its domination over interstate commerce Congress has power, the opinion of the court asserts, over corporations engaged in that commerce. And the power is the same as if the corporation had been created by Congress."
(7) The Federal corporation ercise decision.—The opinion in Flint v. Stone Tracy Co. (220 U. S. 107) has been quoted above to show the difference in the relations that an individual and a corporation bear to Government. The income tax act of 1904 had been declared unconstitutional in the Pollock case. Thereupon, on recommendation of President Taft, Congress enacted a law providing for what was called an excise tax on corporations, measuring the tax by 1 per cent of the corporate income from whatever source. Corporations having less than $5,000 income, and certain labor, agricultural and other associations, were exempt. As the Constitution then stood, a direct tax could not be levied on property, including incomes, except by apportionment. The act came before the Supreme Court in suits involving a variety of corporations that were rep resented by eminent counsel. All possible constitutional objections were raised, but the law was held valid. The tax was imposed upon all corporations on the theory that they were found within the dominion of the Federal Government, and were “privileges” subject to an excise tax. The court said:
“The tax under consideration, as we have construed the statute, may be described as an excise upon the particular privilege of doing business in a corporate capacity ; i, e., with the advantages which arise from corporate or quasi corporate organization; or, when applied to insurance companies, for doing the business of such companies. As was said in the Thompson case (192 U. S., supra) the requirement to pay such taxes involves the exercise of privileges, and the element of absolute and unavoidable demand is lacking. If business is not done in the manner described in the statute, no tax is payable.”
It can as well be said of the matter before the committee that “if business is not done in the manner described in the statute (namely, by corporations) no license or regulation is required." The argument was made that if Congress could thus lay its hands upon corporations, it could impair and even destroy the sovereign right of a State to confer corporate franchises. The court further said:
“ It is urged that this power can be exercised by Congress as to practically destroy the right of the State to create corporations, and for that reason it ought not to be sustained, and reference is made to the declaration of Chief Justice Marshall in McCulloch v. Maryland that the power to tax involves the power to destroy. This argument has not been infrequently addressed to this court with respect to the exercise of the power of Congress.
* The first answer to this is that the judicial can not prescribe to the legislative department of the Government limitations upon the exercise of its acknowledged powers. The power to tax may be exercised oppressively upon persons, but the responsibility of the legislature is not to the courts, but to the people by whom its members are elected. So if a particular tax bears heavily upon a corporation, or a class of corporations, it can not, for that reason only, be pronounced contrary to the Constitution.'
" The argument at last comes to this: That because of possible results, a power lawfully exercised may work disastrously, therefore the courts must interfere to prevent its exercise, because of the consequences feared. No such authority has ever been invested in any court. The remedy for such wrongs, if such in fact exists, is in the ability of the people to choose their own representatives, and not in the exertion of unwarranted powers by courts of justice."
Thus under the taxing cause of the Constitution, Congress could lay its heavy and destroying hand on all corporations within its sovereignty, whether their business was local or interstate, for the reason that their corporate franchises were privileges that were subject to Federal excises. Pari passu, with its exclusive dominion over interstate commerce, the Federal Congress must be able to license and regulate corporations which venture to exercise their corporate franchises in interstate commerce.
(8) Not objectionable as class legislation. The only ground for attacking the act as class legislation, is the limitation of the fifth amendment providing for “due process.” This, and the fourteenth amendment, with its clause of
** equal protection of the law," have been construed in many cases. The courts have uniformly held that a law dealing with a particular class is not objectionable if the basis for the classification is a reasonable and not an arbitrary one.
(a) As dealing only with bituminous coal corporations.-A decision 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 od 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 resides 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, necessities 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) it is said 'Any classification is permissible which has a reasonable relation to some permitted end of governmental action.'
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 1. Natural Carbonic Gas Co., 220 U. S. 61, 78; Crescent Oil Co. v. Mississippi, 257 U, S. 129, 137.) And it makes no difference that the facts may be disputed or their effect opposed by argument and opinion of serious 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, 357, 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.'"
If anything is plain it appears from the report of the United States Coal Commission, the investigation made by the Senate committee, the consensus 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 and its labor wage shamefully defiated; that communities depending on it are pauperized ; that it is the scene of violent labor disputes, the victim of unprecedented cutthroat competition, the cringing prey of the railroad and public utilities, and that, in the final effort to survive, it is wasting beyond future recovery 40 per cent of the coal it mines.
(b) As dealing only with corporations.-It may be suggested 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 Co. 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 separable 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.”
(C) As permitting marketing pools in one industry. The bill would permit marketing pools in interstate commerce of bituminous coal. If the act is not objectionable as class legislation, as shown above, Congress may deal with the subject as it sees fit. Moreover, Congress has dealt with other industries in a similar manner. The act of February 22, 1922, provided for marketing pools in all agricultural productions. The statutes of many States have exempted from their antitrust laws similar marketing associations. In Liberty Warehouse Co. v. Burley Tobacco Growers Association, decided February 20, 1928, an attack was made on the Kentucky law authorizing the marketing association as being class legislation. The United States Supreme Court said :
“ It is stated without contradiction that cooperative marketing statutes substantially like the one under review have been enacted by 42 States. Congress has recognized the utility of cooperative association among farmers in the Clayton Act (October 15, 1914, ch. 323, 38 Stat. L. 731); the Capper-Volstead Act (February 18, 1922, ch. 57, 42 Stat, L. 388; U. S. C., title 7, sec. 291); and the cooperative marketing act of July 2, 1926 (ch. 725, 44 Stat. L. 802; U. S. C., title 7, sec. 414-1, Mason). . These statutes reveal widespread legislative approval of the plan for protecting scattered producers and advancing the public interest.
“In the court below it was said :
"'We take judicial knowledge of the history of the country and of current events, and from that source we know that conditions at the time of the enactment of the Bingham Act were such that the agricultural producer was at the mercy of the speculators and others, who fixed the price of the selling producer and the purchasing price of the final consumer through combinations and other arrangements, whether valid or invalid, and that by reason thereof the former obtained a grossly inadequate price for his products. So much so was that the case that the intermediate handler between the producer and the final consumer injuriously operated upon both classes and fattened and flourished at their expense. It was and is also a well-known fact that without the agricultural producer society could not exist and that the oppression brought about in the manner indicated was driving him from the farm, thereby creating a
condition fully justifying an exemption in his case from any provision of the common law, and likewise justifying legislative action in the exercise of its police power.' (208 Ky. 649, 271 S. W. 695.)
In dealing with a particular class Congress has also imposed restrictions upon that class with reference to its commerce, which does not apply to other commercial activities. For instance, the general regulatory act is the Sherman Act. In the Standard Oil cases the effect of this act in prohibiting transactions, contracts, and conspiracies in restraint of trade was held to be that the restraint must be an unreasonable one. Under the "rule of reason," as applied to the Sherman Act, the steel merger was sustained, though the opinion recites that its organization was of competing units, and that when completed it controlled 40 per cent of the steel trade. But after this interpretation was given the statute Congress, in 1921, enacted the “packers and stockyards act." By this act it was provided (ch. 64, sec. 202, 42 Stat. 161) :
“ It shall be unlawful for any packer to
“(a) Engage in or use any unfair, unjustly discriminatory, or deceptive practice or device in commerce; or
"(c) Sell or otherwise transfer to or for any other packer, or buy or otherwise receive from or for any other packer, any article for the purpose or with the effect of apportioning the supply in commerce between any such pack ors, if such apportionment has the tendency or effect of restraining commeile or of creating a monopoly in commerce; or
"(d) Sell or otherwise transfer to or for any other person, or buy or otherwise receive from or for any other person, any article for the purpose or with the effect of manipulating or controlling prices in commerce, or of creating a monopoly in the acquisition of, buying, selling, or dealing in, any article in commerce or of restraining commerce; or
"(e) Engage in any course of business or do any act for the purpose or with the effect of manipulating or controlling prices in commerce, or of creating a monopoly in' the acquisition of, buying, sclling, or dealing in, any article of commerce, or of restraining commerce.'
It is obvious that in the packers and stockyards act Congress has applied a much stricter rule to the packers in their transactions than the Sherman Act applies to business generally. And it is apparent that in the exercise of the same power of classification Congress can deal with corporations engaged in interstate commerce in bituminous coal in the manner the bill provides.
(9) The arguments in opposition to the power.-(a) The principal argument against the power asserted by the bill is that mining is not interstate commerce, and that its regulation is beyond congressional power. No such question is involved and it would be a waste of time to analyze the cases cited by. the opposition on this point.
(b) To illustrate the misconception of opponents, take the two most strongly relied on, the child-labor cases. The child labor act provided “that no producer, manufacturer, or dealer shall ship or deliver for shipment in interstate or foreign commerce any article or commodity” on which children of certain age had been employed within 30 days prior to the time of the shipment. This act came before the Supreme Court in Hammer v. Dagenhart (217 U. S. 251). There was no question involved of the right of Congress to prescribe the conditions upon which artificial persons created by the State should exercise their corporate franchises within the national sovereignty.
In the second case the act was the general revenue measure approved February 24, 1919. Title No. 12 of the act was tax on employment of child labor. It includes eight sections to the following effect :
“That every person (other than a bona fide boys' or girls' cannery club recognized by the agricultural department of a State and of the United States) operating a mine,
mill, cannery, workshop, or manufacturing establishment situated in the United States in which children under the age of 14 years have been employed ** shall pay for each taxable year addition to all other taxes imposed by law, an excise tax equivalent to 10 per cent of the entire net profits
*." This act came before the court in the child-labor tax case (259 U. S. 20). The court held (p. 39):
“ The case before us can not be distinguished from that of Hammer V. Dagenhart (247 U. S. 251).
In the case at 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."
In the first case it may be noted that Holmes, McKenna, Brandeis, and Clark, J. J., dissented; in the last case Clark, J., renewed his dissent.
No question was involved in either of these cases, or presented to the court, of the right of Congress 'either to regulate corporations engaged in interstate commerce; or to levy an excise tax on such corporations, as was sustained in the case of Flint v. Stone Tracy Co. (220 U. S. 107). As was said in the Flint case (p. 161) :
"The thing taxed is not the mere dealing in merchandise, in which the actual transactions may be the same, whether conducted by individuals or corporations, but the tax is laid upon the privileges which exist in conducting business with the advantages which inhere in the corporate capacity of those taxed. It is this distinctive privilege which is the subject of taxation, not the mere buying or selling or handling of goods, which may be the same, whether done by corporations or individuals.”
The bill before the committee is to be distinguished from the acts concerning child labor in the same respect. The bill invokes the regulatory power of Congress over corporations exercising franchises within national dominion. The regulation in this case, as in the other, is not the mere interstate commerce in coal, in which the actual transactions may be the same, whether conducted by individuals or corporations,” but the regulation is of the artificial person created by another sovereignty which ventures to exercise its corporate franchise within a field that has been absolutely surrendered to Congress.
(c) It is argued that Congress may not indirectly do what it can not do directly. But the answer to this is obvious if Congress can regulate such corporations directly. If Congress had this power it is by reason of the principles already discussed. And if it has the power, the reach of the regulation or condition imposed is wholly for the national legislature. The creation of a corporation, or its admission when created by another government, is an "act appertaining to sovereignty” whose source is the legislative body.
(d) It is finally said that the sweep of the power rejects its acceptance. But as said by the Supreme Court in the lottery case (188 U. S. 363):
“But, as often said, the possible abuse of a power is not an argument against its existence. There is probably no governmental power that may not be exerted to the injury of the public."
A similar argument was made to the court in Flint v. Stone Tracy Co., supra, and the court answered it in a passage quoted above. It has often been argued that the right asserted by a State to exclude and regulate foreign corporations had potentialties for evil and confusion; and yet this power has seldom been abused and certainly has not disturbed the general well-being.
Mr. Beldon, counsel for the Ohio operators, admitted the deplorable condition of the industry and its need for some regulation that transcended the authority or possibility of State control; and the only remedy he saw was Government purchase of the mines. Mr. Belcher, counsel for the West Virginia operators, admits the deplorable conditions and concludes with the mournful note that beyond “the stimulus for a gigantic effort within the industry itself." there is no hope. So, considering this point in its nature as a moral, not legal, deterrent, there is something to be said on both sides.
If Congress has the right to license and regulate corporations engaged in interstate commerce in bituminous coal, the general power invoked by the bill remains unchallenged ; and the only additional inquiry is as to the constitutionality and validity of particular sections.
PRACTICAL EFFICIENCY OF THE BILL
A careful survey discloses that substantially all of such business is carried on by corporations. The hazards peculiarly incident to it—both in operating and marketing-recommend corporations as the prudent method of capital investment. It has been suggested the law could be evaded by the producing corporation selling its output to some individual in the State, whose shipment and commerce would be beyond the control of the bill. If such selling was made in good faith, this would be true, but the guarantee against such actual transactions lies in the hazard that would attend the individual in this disordered commerce. Following the suggestion of Senator Couzens that attempts may be made to avoid the law, we have suggested an additional section as follows:
“A corporation shall be deemed to be engaged in: shipping its bituminous coal in interstate or foreign commerce if it sells and ships its coal in such commerce directly or through the instrumentality of an agent, factor, or broker."
If the sales were not bona fide, and if the corporation retained an interest in the marketing of the coal, it would unquestionably be held within the proposed law; but the suggested amendment would put that matter beyond question.
The advantages that will occur to the primary licenses 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 licensees will ultimately 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.
THE BILL BY SECTIONS
(1) Section 2. Marketing pools.-Section 2 makes it unlawful for " persons, firms, and corporations engaged in interstate or foreign commerce of bituminous coal to form marketing pools
for the the purpose of agreeing on the market prices of their coal," provided that they first secure from the commission a license to be granted upon the acceptance of the provisions of the act and the regulations of the commission made to carry the act into effect.