Three Supreme Court Cases that Twisted the Commerce Clause

By: Funky Euphemism

Despite the words that make up the commerce clause and necessary and proper clause remaining constant over the past two centuries, the Supreme Court’s interpretation of their meaning and reach has not. Over the years, the SCOTUS has used the clause to vastly expand federal power.

The commerce clause delegates to Congress the power to regulate interstate commerce. As originally understood, the power was rather limited. At the time of the drafting of the Constitution, commerce was understood top pertain to trade, or the act of exchanging goods. Commerce power also extended to regulation of the transportation system, shipping, and interstate and international waterways. But the Commerce Clause was never intended to give the federal government the power to regulate manufacturing, agriculture, labor laws, health care, or a host of other activities claimed by progressives.

However, the Supreme Court has erroneously found that the commerce clause, working in conjunction with the necessary and proper clause, allows Congress to regulate certain types of intrastate activity. For example, Congress cannot regulate activity that is not “among” one state and another.

Throughout the twentieth century, the Supreme Court adopted different tests to determine what kinds of intrastate commerce Congress can regulate. During the progressive era, the court used to so-called direct-effects test. In E.C. Knight (1895) Hammer v. Dagenhart (1918) and Schecter Poultry (1935), the court held that Congress could only regulate commerce that had a direct effect on interstate commerce.

However, in 1937, the new deal Court replaced the direct-effect test with the new substantial-effects test. In three cases the Court held that Congress could regulate activity that had a substantial effect on interstate commerce — NLRB v Jones & Laughlin Steel Corp. (1937), United States v Darby (1941) and Wickard v Filburn (1942). These cases are still considered “good law.”

NLRB v Jones and Laughlin Steel Corp (1937)

In 1935, FDR signed into law the National Labor Relations Act (NLRA). This statute gave the National Labor Relations Board (NLRB) the power to punish “unfair labor practices affecting commerce.”

The Jones and Laughlin Steel Corporation argued that the NLRA was “an attempt to regulate all industry, thus invading the reserved powers of the States over their local concerns.” On this question the court split 5-4. Chief Justice Hughes wrote the majority opinion. He acknowledged that the federal government could not regulate “all labor relations,” but only what may be deemed to burden or obstruct commerce.” This test allowed Congress to protect interstate commerce from burdens and obstructions. Hughes held that Congress may “Regulate all local activity that has such a close and substantial relation to interstate commerce that their control is essential or appropriate to protect that commerce from burdens and obstructions.”

However, he qualified this holding with a limiting principle.

“The scope of the power to regulate intrastate activity must be considered in the light of our dual system of government, and may not be extended so as to embrace effects upon interstate commerce so direct and remote that to embrace them in view of our complex society would essentially obliterate the distinction between what is national and what is local and create a completely centralized government.” He added “The question is necessarily one of degree.”

The majority did not reject the distinction between direct and indirect effects. Rather the court found that Congress could prohibit local actives that “burden or obstruct,” that is, have a direct effect, on interstate commerce.

United States v Darby (1941)

In this case, the SCOTUS unanimously held that Congress is allowed to regulate the wages of local lumber workers. Darby rejected the direct effects test and introduced the substantial effects test. This framework recognized that Congress can do more than simply protect interstate commerce from being burdened or obstructed. It could also regulate intrastate activities that’ merely had a substantial effect on interstate commerce. The Court’s analysis, written by Justice Stone relied on the ruling in McCulloch v Maryland (1819)

By citing McCulloch the court indicated the substantial effects test was based on the Necessary and Proper Clause. Darby did not expand the meaning of the word “commerce” in the commerce clause. Rather, under the substantial-effects test, Congress could now regulate local activities – even if those were not commerce- if the law was a “necessary and proper” means to regulate interstate commerce.

Though Darby cited McCulloch, the New Deal Court did not follow Chief Justice Marshall’s reasoning. Justice Stone stated that it did not matter whether Congress was in fact motivated by a desire to regulate local activities.

“Whatever the motive and purpose,” he wrote “regulations on commerce which do not infringe on some constitutional prohibition are within the plenary power conferred on Congress by the Commerce Clause.” Compare that with the limiting principle in McCulloch v Maryland (1819) Where Chief Justice Marshall maintained that the court had a duty to declare unconstitutional a law “under the pretext of executing its powers, to pass laws for the accomplishments of objects not entrusted to the government.”

Finally, the Court held that the Tenth Amendment “states but a truism that all is retained which has not been surrendered.” As a result, the court would no longer consider whether Congress’ implied powers under the necessary and proper clause would intrude on a State’s police power. Darby, accordingly, overruled Hammer v Dagenhart (1918)

Wickard v Filburn (1942)

The third case was Wickard v Filburn. The Agricultural Adjustment Act restricted the amount of wheat that farmer Roscoe Filburn could grow to a specified quota. Secretary of Agriculture, Claude Wickard administered this regulatory scheme. The law restricted the supply of wheat as a means to increase prices, thereby benefiting farmers. According to the record, Filburn used the bulk of the wheat he grew in excess of this quota on his farm to feed his livestock. This way, Filburn could use his own home-grown wheat to feed his livestock at a lower cost, and still benefit by selling his “quota” on the market for the higher price.

The justices considered this case so controversial they asked the parties to re-argue it. While deliberating over the decision, Justice Jackson initially favored an opinion that would have abandoned all scrutiny concerning the scope of Congress’ commerce power. In other words, the court would uphold any economic regulation that Congress deemed reasonable. But even the New Deal Court was not willing to take such a momentous step. Instead, Jackson’s majority opinion expanded the substantial-effects test. The court acknowledged that Filburn’s small amount of locally consumed wheat did not have a substantial effect on interstate commerce. Yet, when all the locally grown wheat nationwide is considered all-together, in the aggregate, those intrastate activities have a substantial effect on interstate commerce. Thus Congress can regulate the locally consumed wheat. This doctrine became known as the aggregation principle.

The court considered evidence that home-grown wheat used to feed livestock affected national wheat prices even though Filburn’s “Own contribution to the supply of wheat may be trivial by itself.” The Court found this fact was not enough to remove him from the scope of federal regulation where, as here, his contribution taken together with that of many other similarly situated “is far from trivial.”

Darby introduced the substantial-effects test, Wickard added the aggregation principle.

It is a myth that the Court in Wickard was concerned with the home-grown wheat that Filburn and his family consumed at the dinner table. “The total amount of wheat, consumed as food varies but relatively little,” the Court said. In contrast, the wheat that farmers like Filburn grew to feed their livestock, which they would then send to the market “constitutes the most variable factor in the disappearance of the wheat crop.” The Court found that this latter activity -in the aggregate- had a substantial effect on the interstate price of wheat. The locally consumed wheat, therefore, had a substantial effect on the interstate price of wheat. The locally consumed wheat thereby undercut the Agricultural Adjustments Act’s plan to maintain higher interstate wheat prices.

This final distinction between family consumed and livestock consumed wheat may seem trivial in its foolishness. But in the aggregate, make Wickard one of the most substantially foolish opinions in the history of the judicial branch.

Nearly six decades would pass before the Rehnquist Court provided a limiting principle for the substantial effects test doctrine that expanded Congress’ power under the substantial-effects test. This came in US v Lopez (1995) with an outer limit that the substantial-effect being regulated is fundamentally economic in nature. As well as adding the so-called “Jurisdictional hook” that had to demonstrate intrastate regulations on commerce regulated items that had traveled in interstate commerce at some point.