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UNITED STATES v. SCHECHTER

August 28, 1934

UNITED STATES
v.
SCHECHTER et al.



The opinion of the court was delivered by: CAMPBELL

CAMPBELL, District Judge.

On July 26, 1934, the grand jury of this district returned an indictment against six defendants, Joseph, Martin, Alex, and Aaron Schechter, A.L.A. Schechter Poultry Corporation, and Schechter Live Poultry Market, Inc., changing conspiracy to violate the National Industrial Recovery Act and the Code of Fair Competition for the Live Poultry Industry, for the Metropolitan Area in and about the City of New York, and substantive violations thereof.

The Code of Fair Competition for the Live Poultry Industry for the Metropolitan Area in and about the City of New York was approved by the President of the United States on April 13, 1934, and it became effective on April 23, 1934, and is divided into eight articles.

 Article 1 deals with the purposes of the code; article 2 defines certain terms used in the code; article 3 deals with the hours which employees may be engaged in the industry; article 4 deals with the scale of wages to be paid to employees of the industry; article 5 deals with general labor provisions which are to govern the industry; article 6 deals with administrative matters concerning the industry; article 7 provides for certain trade practices which the code prohibits; article 8 deals with general provisions respecting the industry.

 The defendants were arrested, pleaded not guilty, and were released on bail, and in pursuance of leave given, they have withdrawn their pleas of not guilty and filed a demurrer to the indictment.

 The indictment contains what are alleged as sixty counts.

 The defendants are each charged with the violation of the counts, the numbers of which are placed after their names:

 Joseph Schechter, counts 1, 27, 28, 37, 39, 40.

 Martin Schechter, counts 1-26, both inclusive, 29-36, both inclusive, 38-60, both inclusive.

 Alex Schechter, counts 1, 4-23, both inclusive, counts 25, 31-33, both inclusive, 35 and 36, 39-60, both inclusive.

 Aaron Schechter, counts 1 and 2, 4-26, both inclusive, 29-33, both inclusive, 35 and 36, 39-60, both inclusive.

 A.L.A. Schechter Poultry Corporation, counts 1-26, both inclusive, 29-33, both inclusive, 38-60, both inclusive.

 Schechter Live Poultry Market, Inc., counts 1, 27, 28, 39, 40.

 The first count charges all of the defendants with conspiracy to commit various offenses against the United States (R.S. § 5440; title 18 U.S. Code, § 88 [18 USCA § 88]) by agreeing and conspiring (a) to sell poultry unfit for human consumption, (b) to sell uninspected poultry, (c) to engage in the practice of "selective killing," (d) to intimidate Code Authority Investigators, (e) to file false and fictitious sales reports, (f) to decline to furnish reports on hours worked by employees, (g) to pay illegal wages, (h) to permit employees to work excessive hours, and (i) to obstruct the Code Supervisor from carrying out his duties.

 The remaining fifty-nine counts charge as separate substantive offenses substantially the same violations as those involved in the conspiracy count as follows, the article and section of the code of the industry alleged to be violated being as follows:

 Counts 2 and 3 deal with sales of unfit poultry (article 7, section 2); counts 4 to 23 deal with sales of uninspected poultry (article 7, section 22); counts 24 to 33 deal with violations of straight killing (article 7, section 14); counts 34 to 37 deal with threats, coercion, and intimidation (article 7, section 21).

 Count 38 deals with false reports (article 6, sections 1 and 2; article 8, section 3).

 Count 39 deals with withholding sales reports (article 8, section 3).

 Count 40 deals with withholding reports of hours worked (article 3, section 4); counts 41 to 50 deal with illegal wages (article 4, sections 1 and 2); counts 51 to 59 deal with excessive hours (article 3, section 1); count 60 deals with illegal sales to persons not licensed (article 7, section 15).

 The demurrer filed by the defendants sets forth eighteen grounds, and following the method pursued by counsel for the government, I will classify them for discussion as follows, placing in parentheses the number of the paragraph of defendants' demurrer being considered:

 I. Recovery Act and Code Unconstitutional:

 1. Section 3 (f) of the act (15 USCA § 703 (f) violates Fifth Amendment; and national emergency does not warrant depriving persons of constitutional rights (16).

 2. Act violates Eighth Amendment by imposing fines (14).

 3. Improper delegation of power in violation of section 1, art. 1, of Constitution (15).

 4. Improper delegation of power in violation of the Fifth Amendment (17).

 II. No Interstate Commerce.

 1. Indictment charges no connection with interstate commerce made unlawful; i.e., code is ultra vires the act (1).

 2. Conspiracy relates solely to intrastate commerce and defendants are engaged in intrastate commerce (7).

 3. No allegation that poultry sold by defendants was moving in interstate commerce (8).

 4. Conspiracy relates to state laws rather than federal (12).

 III. No Violation of Any Federal Statute:

 1. Counts fail to state federal cause of action (3).

 2. Elements of offense not charged (4).

 IV. Indictment Defective:

 1. Too vague and general to be pleaded as res judicata or former jeopardy (2).

 2. Too vague and general to prepare defense (5).

 3. States conclusions as to conspiracy rather than the facts thereof (6).

 4. Object of conspiracy and offense not alleged (10).

 5. Vague as to how conspiracy restrained interstate commerce (13).

 6. Pleader states conclusions without facts on which they are based (9).

 7. Each count is duplicitous (11).

 8. Counts 6-23, both inclusive, 34, 35, 36, 37, 39, 41-60, both inclusive, do not allege violations of the code (18).

 The National Industrial Recovery Act (Act June 16, 1933, title 15, ch. 15, §§ 701 to 712, inclusive, U.S.C. [15 USCA §§ 701-712]), is based on the Commerce Clause of the Constitution (article 1, § 8, cl. 3), not the Welfare Clause (article 1, § 8, cl. 1), and the first question to be considered is whether the act is a valid exercise of the power of Congress to regulate commerce among the states.

 The national power such as the commerce power are supreme in the field. Railroad Commission of Wisconsin v. Chicago, B. & Q.R.R. Co., 257 U.S. 563, 42 S. Ct. 232, 66 L. Ed. 371, 22 A.L.R. 1086. Congress in the exercise of its major powers, including the commerce power, has incidental powers tantamount to the police power of a state. Hoke v. United States, 227 U.S. 308, 33 S. Ct. 281, 57 L. Ed. 523, 43 L.R.A. (N.S.) 906, Ann. Cas. 1913E, 905; Hamilton v. Kentucky Distilleries Co., 251 U.S. 146, 156, 157, 40 S. Ct. 106, 64 L. Ed. 194. Congress is the sole judge of the necessity of its laws, Farmers' and Mechanics' National Bank v. Dearing, 91 U.S. 33, 23 L. Ed. 196, and the courts have refused uniformly to question the means adopted by Congress to accomplish its purposes, McCulloch v. Maryland, 4 Wheat. 418, 4 L. Ed. 579; Legal Tender Cases, 110 U.S. 421, 441, 4 S. Ct. 122, 28 L. Ed. 204.

 With the limits of the commerce power, Congress is no more restricted by the Fifth Amendment than are state Legislatures by the Fourteenth Amendment. Nebbia v. New York, 291 U.S. 502, 537, 54 S. Ct. 505, 78 L. Ed. 940, 89 A.L.R. 1469; Calhoun v. Massie, 253 U.S. 170, 175, 40 S. Ct. 474, 64 L. Ed. 843.

 If the Recovery Act is to be declared obnoxious to the Fifth Amendment, it can only be because there is an unreasonable, arbitrary, or capricious regulation, or if its provisions bear no real or substantial relation to the object sought to be attained.

 The first section of the National Industrial Recovery Act (15 USCA § 701) provides: "A national emergency productive of widespread unemployment and disorganization of industry, which burdens interstate and foreign commerce, affects the public welfare, and undermines the standards of living of the American people, is hereby declared to exist."

 This declaration of an emergency contained in the act is not conclusive upon the courts, but is entitled to great respect, Block v. Hirsh, 256 U.S. 135, 41 S. Ct. 458, 65 L. Ed. 865, 16 A.L.R. 165, and the national emergency so declared has been noticed by the courts, Appalachian Coals, Inc. v. United States, 288 U.S. 344, 53 S. Ct. 471, 77 L. Ed. 825; United States v. Spotless Dollar Cleaners, Inc. (D.C.S.D.N.Y., March 31, 1934) 6 F. Supp. 725, 729.

 An emergency does not create power, but it may furnish the occasion for the exercise of power conferred by the Constitution. Home Building & Loan Ass'n v. Blaisdell, 290 U.S. 398, 54 S. Ct. 231, 78 L. Ed. 413, 88 A.L.R. 1481.

 Following the declaration of the emergency is set forth the purposes of the act, and these findings by Congress, incorporated as they are in the body of the act, must be given full recognition.Hill v. Wallace, 259 U.S. 44, 42 S. Ct. 453, 66 L. Ed. 822; Chicago Board of Trade v. Olsen, 262 U.S. 1, 43 S. Ct. 470, 67 L. Ed. 839; Stafford v. Wallace, 258 U.S. 495, 42 S. Ct. 397, 66 L. Ed. 735, 22 A.L.R. 229; Nebbia v. New York, supra; Block v. Hirsh, supra; United States v. Calistan Packers (D.C.) 4 F. Supp. 660.

 Section 3 (f) of the National Industrial Recovery Act (15 USCA § 703 (f), provides: "When a code of fair competition has been approved or prescribed by the President under this chapter, any violation of any provision thereof in any transaction in or affecting interstate or foreign commerce shall be a misdemeanor and upon conviction thereof an offender shall be fined not more than $500 for each offense, and each day such violation continues shall be deemed a separate offense."

 Penalty statutes of this character have been upheld as valid. United States v. Clyde S.S. Co. (C.C.A.) 36 F.2d 691, certiorari denied, 281 U.S. 744, 50 S. Ct. 350, 74 L. Ed. 1157.

 Penalties for recurrent violations do not make fines excessive. Badders v. United States, 240 U.S. 391, 36 S. Ct. 367, 60 L. Ed. 706; Gulf, Colorado, etc., Ry. v. Texas, 246 U.S. 58, 38 S. Ct. 236, 62 L. Ed. 574.

 I do not overlook the fact that a statute may be obnoxious which imposes penalties so great, or conditions so onerous, that no one will dare test its constitutionality, for fear that his opinion may be wrong and the severe penalty be inflicted. Ex parte Young, 209 U.S. 123, 28 S. Ct. 441, 52 L. Ed. 714, 13 L.R.A. (N.S.) 932, 14 Ann. Cas. 764; but that is not the situation here.

 See Waters-Pierce Oil Co. v. Texas, 212 U.S. 86, 29 S. Ct. 220, 53 L. Ed. 417, in which the Supreme Court held that, in view of the fact that the defendant's assets were valued at more than $40,000,000, penalties of $1,623,500 imposed by a Texas court were not excessive, even though most of the penalties imposed accumulated at the rate of $1,500 per day.

 This point seems to be raised prematurely if defendants merely fear that the aggregate sentence that may be imposed may be excessive. Wadley Southern R. v. Georgia, 235 U.S. 651, 662, 35 S. Ct. 214, 59 L. Ed. 405.

 The provision for a $500 fine for each offense does not violate the Fifth and Eighth Amendments.

 The only delegation of powers involved in this case is the President's approval of the code, and we are not concerned with any delegation of powers which include orders, ...


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