During the 1930s, the New Deal was often subjected to scrutiny, and had many constitutional challenges. Roosevelt was wary of the U.S. Supreme Court early in his first term, and his administration was slow to bring constitutional challenges of New Deal legislation before the Court;Leuchtenburg, at 84. however, early wins for New Deal supporters came at the start of 1934 in Home Building & Loan Association v. Blaisdell and Nebbia v. New York. At issue in each case were state laws relating to economic regulation. Blaisdell concerned the temporary suspension of creditor's remedies by Minnesota in order to combat mortgage foreclosures, finding that temporal relief did not in fact impair the obligation of a contract. Nebbia held that New York could implement price controls on milk, in accordance with the state's police power. While not tests of New Deal legislation themselves, the cases gave cause for relief of administration concerns about Associate Justice Owen Roberts, who voted with the majority in both cases.Leuchtenburg, at 26. Roberts's opinion for the court in Nebbia was encouraging for the administration, as it read: "[T]his court from the early days affirmed that the power to promote the general welfare is inherent in government." Nebbia also holds a particular significance, since it was the one case in which the Court abandoned its jurisprudential distinction between the public and private spheres of economic activity, an essential distinction in the court's analysis of state police power.White, at 203–04. The effect of this decision radiated outward, affecting other doctrinal methods of analysis in wage regulation, labor, and the power of the U.S. Congress to regulate commerce.Cushman, at 5–7.
Just three weeks after its defeat in the railroad pension case, the Roosevelt administration suffered its most severe setback on May 27, 1935, Black Monday.McKenna, at 96–103. Chief Justice Charles Evans Hughes arranged for the decisions announced from the bench that day to be read in order of increasing importance. The Supreme Court ruled unanimously against Roosevelt in three cases. With several cases laying forth the criteria necessary to respect the due process and property rights of individuals, and statements of what constituted an appropriate delegation of legislative powers to the U.S. President, Congress quickly revised the Agricultural Adjustment Act (AAA);Urofsky, at 681–83. however, New Deal supporters still wondered how the AAA would fare against Chief Justice Hughes's restrictive view of the Commerce Clause from the Schechter decision. On what became known as White Monday, on March 29, 1937, the Court handed down three decisions upholding New Deal legislation, two of them unanimous: West Coast Hotel Co. v. Parrish, Wright v. Vinton Branch, and Virginia Railway v. Federation.McKenna, at 420–22. The Wright case upheld a new Frazier-Lemke Act, which had been redrafted to meet the Court's objections in the Radford case; similarly, Virginia Railway case upheld labor regulations for the railroad industry, and is particularly notable for its foreshadowing of how the Wagner Act cases would be decided as the National Labor Relations Board was modeled on the Railway Labor Act contested in the case.
Panama Refining Co. v. Ryan
The first major test of New Deal legislation came in Panama Refining Co. v. Ryan, announced January 7, 1935. Contested in this case was the National Industrial Recovery Act, Section 9(c), in which Congress had delegated to the President authority "to prohibit the transportation in interstate and foreign commerce of petroleum ... produced or withdrawn from storage in excess of the amount permitted ... by any State law". The NIRA passed in June 1933, and Roosevelt moved quickly to file executive orders to regulate the oil industry. Two small, independent oil producers, Panama Refining Co. and Amazon Petroleum Co. filed suit seeking an injunction to halt enforcement, arguing that the law exceeded Congress's interstate commerce power and improperly delegated authority to the President. The Supreme Court, by an 8-1 margin, agreed with the oil companies, finding that Congress had inappropriately delegated its regulatory power without both a clear statement of policy and the establishment of a specific set of standards by which the President was empowered to act. Although a loss for the Roosevelt administration and New Deal supporters, it was mitigated by the narrowness of the Court's opinion, which did not deny Congress's authority to regulate interstate oil commerce.Urofsky, at 676–78. Chief Justice Hughes, who wrote the majority opinion, indicated that the policy which Section 9(c) enacted was not unconstitutional and that it was only ruled unconstitutional because it was poorly worded and did not convey specific powers. The Court's opinion indicated that Congress could resolve the unconstitutional provisions of the Act by simply adding procedural safeguards, hence the Connally Hot Oil Act of 1935 was passed into law.
Gold Clause Cases
Economic regulation again appeared before the Supreme Court in the Gold Clause Cases.Norman v. Baltimore & Ohio Railroad Co., ; Nortz v. United States, ; Perry v. United States, . In his first week after taking office, Roosevelt closed the nation's banks, acting from fears that gold hoarding and international speculation posed a danger to the national monetary system. He based his actions on the Trading with the Enemy Act of 1917. Congress quickly ratified Roosevelt's action with the Emergency Banking Act. A month later, the President issued Executive Order 6102, confiscating all gold coins, bullion, and certificates, requiring they be surrendered to the government by May 1, 1933, in exchange for currency. Congress also passed a joint resolution cancelling all gold clauses in public and private contracts, stating such clauses interfered with its power to regulate U.S. currency. While the Roosevelt administration waited for the Court to return its judgment, contingency plans were made for an unfavorable ruling.McKenna, at 56–66. Ideas circulated within the White House to narrowly exercise the government's power of sovereign immunity by withdrawing the right to sue the government to enforce gold clauses. Attorney General Cummings suggested the Court should be immediately packed to ensure a favorable ruling. Roosevelt himself ordered the Treasury to manipulate the market to give the impression of turmoil, although Treasury Secretary Henry Morgenthau refused. Roosevelt also drew up executive orders to close all stock exchanges and prepared a radio address to the public. On February 18, 1935, the Justices' decisions in all three cases were announced; all supported the government's position by a narrow 5–4 majority. Chief Justice Hughes wrote the opinion for each case, finding the government had plenary power to regulate money. As such, the abrogation of both private and public contractual gold clauses was within congressional reach when such clauses represented a threat to Congress's control of the monetary system. Speaking for the Court in the Perry case, Hughes's opinion was remarkable: in a judicial tongue-lashing not seen since Marbury v. Madison, Hughes chided Congress for an act that, while legal, was regarded as clearly immoral; however, Hughes ultimately found the plaintiff had no cause of action, and thus no standing to sue the government. Railroad Retirement Board v. Alton Railroad Co.
While not itself a part of the New Deal, the Roosevelt administration kept a close eye on the challenge to the 1934 Railroad Retirement Act, Railroad Retirement Board v. Alton Railroad Co. Its similarity with the Social Security Act meant the test of the railroad pension regime would serve as an indicator of whether Roosevelt's ambitious retirement program would be found constitutional.Leuchtenburg, at 27–39. The railroad pension was designed to encourage older rail workers to retire, thereby creating jobs for younger railroaders desperately in need of work, although ostensibly Congress passed the act on the grounds that it would increase safety on the country's railways. Numerous challenges to the law were filed in the Supreme Court of the District of Columbia, and injunctions were issued on the grounds that the law was an unconstitutional regulation of an activity not connected to interstate commerce. The Supreme Court took the case without waiting for an appeal to the District of Columbia Court of Appeals.McKenna, at 66–73. On May 6, 1935, Justice Roberts's 5–4 opinion for the Court rejected the government's position, dismissing the purported effect on railway safety as "without support in reason or common sense". Furthermore, Roberts took issue with a provision of the act which awarded pension computation credit to former rail workers, regardless of when they had last worked in the industry. Roberts characterized the provision as "a naked appropriation of private property"—taking the belongings "of one and bestowing it upon another"—and a violation of the Due Process Clause of the Fifth Amendment.
Black Monday Humphrey's Executor v. United States
The first of three cases on Black Monday read out was Humphrey's Executor v. United States. After taking office, President Roosevelt came to believe that William E. Humphrey, a Republican appointed to a six-year term on the Federal Trade Commission (FTC) in 1931, was at odds with the administration's New Deal initiatives. Writing to request Humphrey's resignation from the FTC in August 1933, Roosevelt openly admitted his reason for seeking his removal: "I did not feel that your mind and my mind go along together."Leuchtenburg, at 60. This proved to be a blunder on Roosevelt's part. When Humphrey could not be persuaded to resign, Roosevelt dismissed him from office on October 7.Leuchtenburg, at 61–62. Humphrey promptly filed suit to return to his appointed office and to collect backpay. The basis for his suit was the 1914 Federal Trade Commission Act, which specified that the President was only authorized to remove a FTC commissioner "for inefficiency, neglect of duty, or malfeasance in office".Leuchtenburg, at 69. Humphrey died on February 14, 1934, and his suit was carried on by his wife—as executor of his estate—for backpay up to the date of his death (with interest). Associate Justice George Sutherland read the Court's opinion, holding that Roosevelt had indeed acted outside of his authority when he fired Humphrey from the FTC, stating that Congress had intended regulatory commissions such as the FTC to be independent of executive influence.Urofsky, at 678–81.
Louisville Joint Stock Land Bank v. Radford
Next announced was Louisville Joint Stock Land Bank v. Radford. The 1934 Frazier-Lemke Farm Bankruptcy Act was designed to give aid to debt-ridden farmers, allowing them to reacquire farms they had lost from foreclosure, or to petition the Bankruptcy Court within their district to suspend foreclosure proceedings.McKenna, at 100–01. The legislation's ultimate goal was to help those farmers scale down their mortgages.