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U.S. Supreme Court

Bailey v. Alabama, 219 U.S. 219 (1911)

Argued October 20, 21, 1910

Decided January 3, 1911

ERROR TO THE SUPREME COURT OF THE STATE OF ALABAMA

Page 219 U. S. 227

MR. JUSTICE HUGHES delivered the opinion of the Court:

This is a writ of error to review a judgment of the Supreme Court of the State of Alabama, affirming a judgment of
conviction in the Montgomery City Court. The statute upon which the conviction was based is assailed as in
violation of the Fourteenth Amendment of the Constitution of the United States upon the ground that it deprived the
plaintiff in error of his liberty without due process of law and denied him the equal protection of the laws, and also
of the Thirteenth Amendment, and of the act of Congress providing for the enforcement of that Amendment, in that
the effect of the statute is to enforce involuntary servitude by compelling personal service in liquidation of a debt.

The statute in question is § 4730 of the Code of Alabama of 1896, as amended in 1903 and 1907. The section of the
Code as it stood before the amendments provided that any person who, with intent to injure or defraud his employer,
entered into a written contract for service, and thereby obtained from his employer money or other personal
property, and with like intent and without just cause, and without refunding the money or paying for the property,
refused to perform the service, should be punished as if he had stolen it. In 1903 (Gen. Acts, Ala., 1903, p. 345) the
section was amended so as to make the refusal or failure to perform the service, or to refund the money, or pay for
the property, without just cause, prima facie evidence of the intent to injure or defraud. This amendment was
enlarged by that of 1907. Gen.Acts, Ala., 1907, p. 636. The section, thus amended, reads as follows:

"Any person who, with intent to injure or defraud his

Page 219 U. S. 228

employer, enters into a contract in writing for the performance of any act of service, and thereby obtains money or
other personal property from such employer, and with like intent, and without just cause, and without refunding such
money or paying for such property, refuses or fails to perform such act or service must on conviction be punished by
a fine in double the damage suffered by the injured party, but not more than 0, one-half of said fine to go to the
county and one-half to the party injured; and any person who, with intent to injure or defraud his landlord, enters
into any contract in writing for the rent of land, and thereby obtains any money or other personal property from such
landlord, and with like intent, without just cause, and without refunding such money or paying for such property,
refuses or fails to cultivate such land, or to comply with his contract relative thereto, must on conviction be punished
by fine in double the damage suffered by the injured party, but not more than 0, one-half of said fine to go to the
county and one-half to the party injured. And the refusal or failure of any person who enters into such contract to
perform such act or service or to cultivate such land or refund such money or pay for such property without just
cause shall be prima facie evidence of the intent to injure his employer or landlord or defraud him. That all laws and
parts of laws in conflict with the provisions hereof be and the same are hereby repealed."

There is also a rule of evidence enforced by the courts of Alabama, which must be regarded as having the same
effect as if read into the statute itself, that the accused, for the purpose of rebutting the statutory presumption, shall
not be allowed to testify "as to his uncommunicated motives, purpose, or intention." Bailey v. State, 161 Ala. 77, 78.

Bailey, the plaintiff in error, was committed for detention on the charge of obtaining fifteen dollars under a

Page 219 U. S. 229

contract in writing with intent to injure or defraud his employer. He sued out a writ of habeas corpus challenging the
validity of the statute. His discharge was refused, and the supreme court of the state affirmed the order, holding the
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statute to be constitutional. 158 Ala. 18. On writ of error from this Court, it was held that the case was brought here
prematurely, and the questions now presented were expressly reserved. Bailey v. Alabama, 211 U. S. 452.

Having failed to obtain his release on habeas corpus, Bailey was indicted on the following charge:

"The Grand Jury of said county charge that, before the finding of this indictment, Alonzo Bailey, with intent to
injure or defraud his employer, the Riverside Company, a corporation, entered into a written contract to perform
labor or services for the Riverside Company, a corporation, and obtained thereby the sum of fifteen dollars from the
said the Riverside Company, and afterwards with like intent, and without just cause, failed or refused to perform
such labor or services, or to refund such money, against the peace and dignity of the State of Alabama."

Motion to quash and a demurrer to the indictment were overruled. Upon the trial, the following facts appeared: on
December 26, 1907, Bailey entered into a written contract with the Riverside Company, which provided:

"That I, Lonzo Bailey, for and in consideration of the sum of Fifteen Dollars in money, this day in hand paid to me
by said the Riverside Company, the receipt whereof I do hereby acknowledge, I, the said Lonzo Bailey, do hereby
consent, contract, and agree to work and labor for the said Riverside Company as a farm hand on their Scott's Bend
place in Montgomery County, Alabama, from the 30 day of Dec., 1907, to the 30 day of Dec., 1908, at and for the
sum of 12.00 per month. "

Page 219 U. S. 230

"And the said Lonzo Bailey agrees to render respectful and faithful service to the said the Riverside Company, and
to perform diligently and actively all work pertaining to such employment, in accordance with the instructions of the
said the Riverside Company or agent."

"And the said the Riverside Company, in consideration of the agreement above mentioned of the said Lonzo Bailey,
hereby employs the said Lonzo Bailey as such farm hand for the time above set out, and agrees to pay the said
Lonzo Bailey the sum of .75 per month."

The manager of the employing company testified that, at the time of entering into this contract, there were present
only the witness and Bailey, and that the latter then obtained from the company the sum of fifteen dollars; that
Bailey worked under the contract throughout the month of January and for three or four days in February, 1908, and
then,

"without just cause, and without refunding the money, ceased to work for said Riverside Company, and has not
since that time performed any service for said company in accordance with or under said contract, and has refused
and failed to perform any further service thereunder, and has, without just cause, refused and failed to refund said
fifteen dollars."

He also testified, in response to a question from the attorney for the defendant and against the objection of the state,
that Bailey was a negro. No other evidence was introduced.

The court, after defining the crime in the language of the statute, charged the jury, in accordance with its terms, as
follows:

"And the refusal of any person who enters into such contract to perform such act or service, or refund such money,
or pay for such property, without just cause, shall be prima facie evidence of the intent to injure his employer, or to
defraud him."

Bailey excepted to these instructions, and requested the court to instruct the jury that the statute and the

Page 219 U. S. 231

provision creating the presumption were invalid, and further that

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"the refusal or failure of the defendant to perform the service alleged in the indictment, or to refund the money
obtained from the Riverside Company under the contract between it and the defendant, without cause, does not of
itself make out a prima facie case of the defendant's intent to injure or defraud said Riverside Company."

The court refused these instructions, and Bailey took exception.

The jury found the accused guilty, fixed the damages sustained by the injured party at fifteen dollars, and assessed a
fine of thirty dollars. Thereupon Bailey was sentenced by the court to pay the fine of thirty dollars and the costs, and
in default thereof to hard labor "for twenty days in lieu of said fine, and one hundred and sixteen days on account of
said costs."

On appeal to the supreme court of the state, the constitutionality of the statute was again upheld, and the judgment
affirmed. 161 Ala. 75.

We at once dismiss from consideration the fact that the plaintiff in error is a black man. While the action of a state,
through its officers charged with the administration of a law fair in appearance, may be of such a character as to
constitute a denial of the equal protection of the laws (Yick Wo v. Hopkins, 118 U. S. 356, 373), such a conclusion is
here neither required nor justified. The statute, on its face, makes no racial discrimination, and the record fails to
show its existence in fact. No question of a sectional character is presented, and we may view the legislation in the
same manner as if it had been enacted in New York or in Idaho. Opportunities for coercion and oppression, in
varying circumstances, exist in all parts of the Union, and the citizens of all the states are interested in the
maintenance of the constitutional guaranties the consideration of which is here involved.

Page 219 U. S. 232

Prior to the amendment of the year 1903, enlarged in 1907, the statute did not make the mere breach of the contract,
under which the employee had obtained from his employer money which was not refunded or property which was
not paid for, a crime. The essential ingredient of the offense was the intent of the accused to injure or defraud. To
justify conviction, it was necessary that this intent should be established by competent evidence, aided only by such
inferences as might logically be derived from the facts proved, and should not be the subject of mere surmise or
arbitrary assumption.

This was the construction which the Supreme Court of Alabama placed upon the statute, as it then stood, in Ex parte
Riley, 94 Ala. 82. In that case, the court said (pp. 83, 84):

"The ingredients of this statutory offense are: (1) a contract in writing by the accused for the performance of any act
or service; (2) an intent on the part of the accused, when he entered into the contract, to injure or defraud his
employer; (3) the obtaining by the accused of money or other personal property from such employer by means of
such contract entered into with such intent; and (4) the refusal by the accused, with like intent, and without just
cause, and without refunding such money, or paying for such property, to perform such act or service. This statute
by no means provides that a person who has entered into a written contract for the performance of services, under
which he has obtained money or other personal property, is punishable as if he had stolen such money or other
personal property, upon his refusal to perform the contract, without refunding the money or paying for the property.
A mere breach of a contract is not by the statute made a crime. The criminal feature of the transaction is wanting
unless the accused entered into the contract with intent to injure or defraud his employer, and unless his refusal to
perform

Page 219 U. S. 233

was with like intent and without just cause. That there was an intent to injure or defraud the employer, both when the
contract was entered into and when the accused refused performance, are facts which must be shown by the
evidence. As the intent is the design, purpose, resolve, or determination in the mind of the accused, it can rarely be
proved by direct evidence, but must be ascertained by means of inferences from the facts and circumstances
developed by the proof. Carlisle v. State, 76 Ala. 75; Mack v. State, 63 Ala. 138. In the absence, however, of
evidence from which such inferences may be drawn, the jury are not justified in indulging in mere unsupported
conjectures, speculations, or suspicions as to intentions which were not disclosed by any visible or tangible act,
expression, or circumstance. Green v. State, 68 Ala. 539."
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See also Dorsey v. State, 111 Ala. 40; McIntosh v. State, 117 Ala. 128.

We pass, then, to the consideration of the amendment, through the operation of which under the charge of the trial
court this conviction was obtained. No longer was it necessary for the prosecution to comply with the rule of the
Riley case, supra, in order to establish the intent to injure or defraud which, as the court said, constituted the gist of
the offense. It was "the difficulty in proving the intent, made patent by that decision," which "suggested the
amendment of 1903." Bailey v. State, 158 Ala. p. 25. By this amendment, it was provided, in substance, that the
refusal or failure to perform the service contracted for, or to refund the money obtained without just cause should be
prima facie evidence of the intent to injure or defraud.

But the refusal or failure to perform the service without just cause constitutes the breach of the contract. The justice
of the grounds of refusal or failure must, of course, be determined by the contractual obligation assumed.

Page 219 U. S. 234

Whatever the reason for leaving the service, if, judged by the terms of the contract, it is insufficient in law, it is not
"just cause." The money received and repayable, nothing more being shown, constitutes a mere debt. The asserted
difficulty of proving the intent to injure or defraud is thus made the occasion for dispensing with such proof so far as
the prima facie case is concerned. And the mere breach of a contract for personal service, coupled with the mere
failure to pay a debt which was to be liquidated in the course of such service, is made sufficient to warrant a
conviction.

It is no answer to say that the jury must find, and here found, that a fraudulent intent existed. The jury, by their
verdict, cannot add to the facts before them. If nothing be shown but a mere breach of a contract of service and a
mere failure to pay a debt, the jury have nothing else to go upon, and the evidence becomes nothing more because of
their finding. Had it not been for this statutory presumption, supplied by the amendment, no one would be heard to
say that Bailey could have been convicted.

Prima facie evidence is sufficient evidence to outweigh the presumption of innocence, and, if not met by opposing
evidence, to support a verdict of guilty. "It is such as, in judgment of law, is sufficient to establish the fact, and, if
not rebutted, remains sufficient for the purpose." Kelly v. Jackson, 6 Pet. 632.

We are not impressed with the argument that the Supreme Court of Alabama has construed the amendment to mean
that the jury is not controlled by the presumption, if unrebutted, and still may find the accused not guilty. That court,
in its opinion, said:

"Again, it must be borne in mind that the rule of evidence fixed by the statute does not make it the duty of the jury to
convict on the evidence referred to in the enactment, if unrebutted, whether satisfied thereby of the guilt of the
accused beyond a reasonable doubt or not. On the contrary,

Page 219 U. S. 235

with such evidence before them, the jury are still left free to find the accused guilty or not guilty, according as they
may be satisfied of his guilt or not, by the whole evidence."

161 Ala. 78.

But the controlling construction of the statute is the affirmance of this judgment of conviction. It is not sufficient to
declare that the statute does not make it the duty of the jury to convict where there is no other evidence but the
breach of the contract and the failure to pay the debt. The point is that, in such a case, the statute authorizes the jury
to convict. It is not enough to say that the jury may not accept that evidence as alone sufficient, for the jury may
accept it, and they have the express warrant of the statute to accept it as a basis for their verdict. And it is in this light
that the validity of the statute must be determined.

It is urged that the time and circumstances of the departure from service may be such as to raise not only an
inference, but a strong inference, of fraudulent intent. There was no need to create a statutory presumption, and it
was not created for such a case. Where circumstances are shown permitting a fair inference of fraudulent purpose,
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the case falls within the rule of Ex parte Riley (supra), which governed prosecutions under the statute before the
amendment was made. The "difficulty," which admittedly the amendment was intended to surmount, did not exist
where natural inferences sufficed. Plainly the object of the statute was to hit cases which were destitute of such
inferences, and to provide that the mere breach of the contract and the mere failure to pay the debt might do duty in
their absence.

While, in considering the natural operation and effect of the statute, as amended, we are not limited to the particular
facts of the case at the bar, they present an illuminating illustration. We may briefly restate them. Bailey made a
contract to work for a year at a month. He

Page 219 U. S. 236

received , and he was to work this out, being entitled monthly only to .75 of his wages. No one was present when he
made the contract but himself and the manager of the employing company. There is not a particle of evidence of any
circumstance indicating that he made the contract or received the money with any intent to injure or defraud his
employer. On the contrary, he actually worked for upwards of a month. His motive in leaving does not appear, the
only showing being that it was without legal excuse and that he did not repay the money received. For this he is
sentenced to a fine of thirty dollars and to imprisonment at hard labor, in default of the payment of the fine and
costs, for 136 days. Was not the case the same in effect as if the statute had made it a criminal act to leave the
service without just cause and without liquidating the debt? To say that he has been found guilty of an intent to
injure or defraud his employer, and not merely for breaking his contract and not paying his debt, is a distinction
without a difference to Bailey.

Consider the situation of the accused under this statutory presumption. If, at the outset, nothing took place but the
making of the contract and the receipt of the money, he could show nothing else. If there was no legal justification
for his leaving his employment, he could show none. If he had not paid the debt, there was nothing to be said as to
that. The law of the state did not permit him to testify that he did not intend to injure or defraud. Unless he were
fortunate enough to be able to command evidence of circumstances affirmatively showing good faith, he was
helpless. He stood stripped by the statute of the presumption of innocence and exposed to conviction for fraud upon
evidence only of breach of contract and failure to pay.

It is said that we may assume that a fair jury would convict only where the circumstances sufficiently indicated a
fraudulent intent. Why should this be assumed

Page 219 U. S. 237

in the face of the statute and upon this record? In the present case, the jury did convict, although there is an absence
of evidence sufficient to establish fraud under the familiar rule that fraud will not be presumed, and the obvious
explanation of the verdict is that the trial court, in accordance with the statute, charged the jury that refusal to
perform the service, or to repay the money, without just cause, constituted prima facie evidence of the commission
of the offense which the statute defined. That is, the jury were told in effect that the evidence, under the statutory
rule, was sufficient, and hence they treated it as such. There is no basis for an assumption that the jury would have
acted differently if Bailey had worked for three months, or six months, or nine months, if in fact his debt had not
been paid. The normal assumption is that the jury will follow the statute, and, acting in accordance with the
authority it confers, will accept as sufficient what the statute expressly so describes.

It may further be observed that, under the statute, there is no punishment for the alleged fraud if the service is
performed or the money refunded. If the service is rendered in liquidation of the debt, there is no punishment, and if
it is not rendered, and the money is not refunded, that fact alone is sufficient for conviction. By a statute passed by
the Legislature of Alabama in 1901, it was made a misdemeanor for any person who had made a written contract to
labor for or serve another for any given time to leave the service before the expiration of the contract and without the
consent of the employer, and to make a second contract of similar nature with another person without giving the
second employer notice of the existence of the first contract. This was held unconstitutional upon the ground that it
interfered with freedom of contract. Toney v. State, 141 Ala. 120. But, judging it by its necessary operation and
obvious effect, the fundamental purpose plainly was to compel, under the sanction

Page 219 U. S. 238

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of the criminal law, the enforcement of the contract for personal service, and the same purpose, tested by like
criteria, breathes despite its different phraseology through the amendments of 1903 and 1907 of the statute here in
question.

We cannot escape the conclusion that, although the statute in terms is to punish fraud, still its natural and inevitable
effect is to expose to conviction for crime those who simply fail or refuse to perform contracts for personal service
in liquidation of a debt, and, judging its purpose by its effect, that it seeks in this way to provide the means of
compulsion through which performance of such service may be secured. The question is whether such a statute is
constitutional.

This Court has frequently recognized the general power of every legislature to prescribe the evidence which shall be
received, and the effect of that evidence, in the courts of its own government. Fong Yue Ting v. United States, 149
U. S. 698, 479. In the exercise of this power, numerous statutes have been enacted providing that proof of one fact
shall be prima facie evidence of the main fact in issue, and where the inference is not purely arbitrary, and there is a
rational relation between the two facts, and the accused is not deprived of a proper opportunity to submit all the facts
bearing upon the issue, it has been held that such statutes do not violate the requirements of due process of law.
Adams v. New York, 192 U. S. 585; Mobile, Jackson & Kansas City Railroad Co. v. Turnipseed, decided December
19, 1910, ante, P. 35.

The latest expression upon this point is found in the case last cited, where the court, by MR. JUSTICE LURTON,
said:

"That a legislative presumption of one fact from evidence of another may not constitute a denial of due process of
law, or a denial of the equal protection of the law, it is only essential that there shall be some rational connection
between the fact proved and the ultimate fact

Page 219 U. S. 239

presumed, and that the inference of one fact from proof of another shall not be so unreasonable as to be a purely
arbitrary mandate. So also, it must not, under guise of regulating the presentation of evidence, operate to preclude
the party from the right to present his defense to the main fact thus presumed. If a legislative provision not
unreasonable in itself, prescribing a rule of evidence in either criminal or civil cases does not shut out from the party
affected a reasonable opportunity to submit to the jury in his defense all of the facts bearing upon the issue, there is
no ground for holding that due process of law has been denied him."

In this class of cases, where the entire subject matter of the legislation is otherwise within state control, the question
has been whether the prescribed rule of evidence interferes with the guaranteed equality before the law, or violates
those fundamental rights and immutable principles of justice which are embraced within the conception of due
process of law. But where the conduct or fact the existence of which is made the basis of the statutory presumption
itself falls within the scope of a provision of the federal Constitution, a further question arises. It is apparent that a
constitutional prohibition cannot be transgressed indirectly by the creation of a statutory presumption, any more than
it can be violated by direct enactment. The power to create presumptions is not a means of escape from
constitutional restrictions. And the state may not in this way interfere with matters withdrawn from its authority by
the federal Constitution, or subject an accused to conviction for conduct which it is powerless to proscribe.

In the present case, it is urged that the statute, as amended, through the operation of the presumption for which it
provides, violates the Thirteenth Amendment of the Constitution of the United States and the act of Congress passed
for its enforcement.

Page 219 U. S. 240

The Thirteenth Amendment provides:

"SECTION 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall
have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction."

"SEC 2. Congress shall have power to enforce this article by appropriate legislation."
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Pursuant to the authority thus conferred, Congress passed the Act of March 2, 1867, c. 187, 14 Stat. 546, the
provisions of which are now found in §§ 1990 and 5526 of the Revised Statutes, as follows:

"SEC. 1990. The holding of any person to service or labor under the system known as peonage is abolished and
forever prohibited in the Territory of New Mexico, or in any other territory or state of the United States; and all acts,
laws, resolutions, orders, regulations, or usages of the Territory of New Mexico, or of any other territory or state,
which have heretofore established, maintained, or enforced, or by virtue of which any attempt shall hereafter be
made to establish, maintain, or enforce, directly or indirectly, the voluntary or involuntary service or labor of any
persons as peons, in liquidation of any debt or obligation, or otherwise, are declared null and void."

"SEC. 5526. Every person who holds, arrests, returns, or causes to be held, arrested, or returned, or in any manner
aids in the arrest or return, of any person to a condition of peonage, shall be punished by a fine of not less than one
thousand nor more than five thousand dollars, or by imprisonment not less than one year nor more than five years, or
by both."

The language of the Thirteenth Amendment was not new. It reproduced the historic words of the Ordinance of 1787
for the Government of the Northwest Territory, and gave them unrestricted application within the United States and
all places subject to their jurisdiction. While the immediate concern was with African slavery, the

Page 219 U. S. 241

Amendment was not limited to that. It was a charter of universal civil freedom for all persons, of whatever race,
color, or estate, under the flag.

The words involuntary servitude have a "larger meaning than slavery."

"It was very well understood that, in the form of apprenticeship for long terms, as it had been practiced in the West
India Islands, on the abolition of slavery by the English government, or by reducing the slaves to the condition of
serfs attached to the plantation, the purpose of the article might have been evaded if only the word 'slavery' had been
used."

Slaughter-House Cases, 16 Wall. 69. The plain intention was to abolish slavery of whatever name and form and all
its badges and incidents; to render impossible any state of bondage; to make labor free, by prohibiting that control
by which the personal service of one man is disposed of or coerced for another's benefit, which is the essence of
involuntary servitude.

While the Amendment was self-executing so far as its terms were applicable to any existing condition, Congress
was authorized to secure its complete enforcement by appropriate legislation. As was said in the Civil Rights Cases:

"By its own unaided force and effect, it abolished slavery and established universal freedom. Still, legislation may
be necessary and proper to meet all the various cases and circumstances to be affected by it and to prescribe proper
modes of redress for its violation in letter or spirit. And such legislation may be primary and direct in its character,
for the amendment is not a mere prohibition of state laws establishing or upholding slavery, but an absolute
declaration that slavery or involuntary servitude shall not exist in any part of the United States."

109 U.S. 20.

The Act of March 2, 1867 (Rev. Stat. §§ 1990, 5526, supra), a was a valid exercise of this express authority. Clyatt
v. United States, 197 U. S. 207. It declared that all laws of any state by virtue of which any attempt should be made

"to establish, maintain, or enforce, directly or

Page 219 U. S. 242

indirectly, the voluntary or involuntary service or labor of any person as peons in liquidation of any debt or
obligation or otherwise"

should be null and void.

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Peonage is a term descriptive of a condition which has existed in Spanish America, and especially in Mexico. The
essence of the thing is compulsory service in payment of a debt. A peon is one who is compelled to work for his
creditor until his debt is paid. And, in this explicit and comprehensive enactment, Congress was not concerned with
mere names or manner of description or with a particular place or section of the country. It was concerned with a
fact, wherever it might exist -- with a condition, however named and wherever it might be established, maintained,
or enforced.

The fact that the debtor contracted to perform the labor which is sought to be compelled does not withdraw the
attempted enforcement from the condemnation of the statute. The full intent of the constitutional provision could be
defeated with obvious facility if, through the guise of contracts under which advances had been made, debtors could
be held to compulsory service. It is the compulsion of the service that the statute inhibits, for when that occurs, the
condition of servitude is created, which would be not less involuntary because of the original agreement to work out
the indebtedness. The contract exposes the debtor to liability for the loss due to the breach, but not to enforced labor.
This has been so clearly stated by this Court in the case of Clyatt, supra, that discussion is unnecessary. The Court
there said:

"The constitutionality and scope of §§ 1990 and 5526 present the first questions for our consideration. They prohibit
peonage. What is peonage? It may be defined as a status or condition of compulsory service based upon the
indebtedness of the peon to the master. The basal fact is indebtedness. As said by Judge Benedict, delivering the
opinion in Jaremillo v. Romero, 1 N.M.

Page 219 U. S. 243

190, 194: 'One fact existed universally: all were indebted to their masters. This was the cord by which they seemed
bound to their masters' service.' Upon this is based a condition of compulsory service. Peonage is sometimes
classified as voluntary or involuntary, but this implies simply a difference in the mode of origin, but none in the
character of the servitude. The one exists where the debtor voluntarily contracts to enter the service of his creditor.
The other is forced upon the debtor by some provision of law. But peonage, however created, is compulsory service,
involuntary servitude. The peon can release himself therefrom, it is true, by the payment of the debt, but otherwise
the service is enforced. A clear distinction exists between peonage and the voluntary performance of labor or
rendering of services in payment of a debt. In the latter case, the debtor, though contracting to pay his indebtedness
by labor or service, and subject like any other contractor to an action for damages for breach of that contract, can
elect at any time to break it, and no law or force compels performance or a continuance of the service. We need not
stop to consider any possible limits or exceptional cases, such as the service of a sailor (Robertson v. Baldwin, 165
U. S. 275), or the obligations of a child to its parents, or of an apprentice to his master, or the power of the
legislature to make unlawful and punish criminally an abandonment by an employee of his post of labor in any
extreme cases. That which is contemplated by the statute is compulsory service to secure the payment of a debt."

197 U.S. 197 U. S. 215-216.

The act of Congress, nullifying all state laws by which it should be attempted to enforce the "service or labor of any
persons as peons, in liquidation of any debt or obligation, or otherwise," necessarily embraces all legislation which
seeks to compel the service or labor by making it a crime to refuse or fail to perform it. Such laws would furnish the
readiest means of compulsion. The Thirteenth

Page 219 U. S. 244

Amendment prohibits involuntary servitude except as punishment for crime. But the exception, allowing full latitude
for the enforcement of penal laws, does not destroy the prohibition. It does not permit slavery or involuntary
servitude to be established or maintained through the operation of the criminal law by making it a crime to refuse to
submit to the one or to render the service which would constitute the other. The state may impose involuntary
servitude as a punishment for crime, but it may not compel one man to labor for another in payment of a debt, by
punishing him as a criminal if he does not perform the service or pay the debt.

If the statute in this case had authorized the employing company to seize the debtor, and hold him to the service until
he paid the fifteen dollars, or had furnished the equivalent in labor, its invalidity would not be questioned. It would
be equally clear that the state could not authorize its constabulary to prevent the servant from escaping, and to force
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him to work out his debt. But the state could not avail itself of the sanction of the criminal law to supply the
compulsion any more than it could use or authorize the use of physical force.

"In contemplation of the law, the compulsion to such service by the fear of punishment under a criminal statute is
more powerful than any guard which the employer could station."

Ex parte Hollman, 79 S.C. 22.

What the state may not do directly it may not do indirectly. If it cannot punish the servant as a criminal for the mere
failure or refusal to serve without paying his debt, it is not permitted to accomplish the same result by creating a
statutory presumption which, upon proof of no other fact, exposes him to conviction and punishment. Without
imputing any actual motive to oppress, we must consider the natural operation of the statute here in question
(Henderson v. Mayor, 92 U.S. P. 268), and it is apparent that it furnishes a convenient instrument for the coercion

Page 219 U. S. 245

which the Constitution and the act of Congress forbid -- an instrument of compulsion peculiarly effective as against
the poor and the ignorant, its most likely victims. There is no more important concern than to safeguard the freedom
of labor upon which alone can enduring prosperity be based. The provision designed to secure it would soon become
a barren form if it were possible to establish a statutory presumption of this sort, and to hold over the heads of
laborers the threat of punishment for crime, under the name of fraud, but merely upon evidence of failure to work
out their debts. The act of Congress deprives of effect all legislative measures of any state through which, directly or
indirectly, the prohibited thing, to-wit, compulsory service to secure the payment of a debt, may be established or
maintained, and we conclude that § 4730, as amended, of the Code of Alabama, in so far as it makes the refusal or
failure to perform the act or service, without refunding the money or paying for the property prima facie, evidence
of the commission received of the crime which the section defines is in conflict with the Thirteenth Amendment, and
the legislation authorized by that Amendment, and is therefore invalid.

In this view, it is unnecessary to consider the contentions which have been made under the Fourteenth Amendment.
As the case was given to the jury under instructions which authorized a verdict in accordance with the statutory
presumption, and the opposing instructions requested by the accused were refused, the judgment must be reversed.

Reversed and cause remanded for further proceedings not inconsistent with this opinion.

MR. JUSTICE HOLMES, dissenting:

We all agree that this case is to be considered and decided in the same way as if it arose in Idaho or New York.

Page 219 U. S. 246

Neither public document nor evidence discloses a law which, by its administration, is made something different
from what it appears on its face, and therefore the fact that, in Alabama, it mainly concerns the blacks does not
matter. Yick Wo v. Hopkins, 118 U. S. 356, does not apply. I shall begin, then, by assuming for the moment what I
think is not true, and shall try to show not to be true, that this statute punishes the mere refusal to labor according to
contract as a crime, and shall inquire whether there would be anything contrary to the Thirteenth Amendment or the
statute if it did, supposing it to have been enacted in the State of New York. I cannot believe it. The Thirteenth
Amendment does not outlaw contracts for labor. That would be at least as great a misfortune for the laborer as for
the man that employed him. For it certainly would affect the terms of the bargain unfavorably for the laboring man if
it were understood that the employer could do nothing in case the laborer saw fit to break his word. But any legal
liability for breach of a contract is a disagreeable consequence which tends to make the contractor do as he said he
would. Liability to an action for damages has that tendency as well a fine. If the mere imposition of such
consequences as tend to make a man keep to his promise is the creation of peonage when the contract happens to be
for labor, I do not see why the allowance of a civil action is not, as well as an indictment ending in fine. Peonage is
service to a private master at which a man is kept by bodily compulsion against his will. But the creation of the
ordinary legal motives for right conduct does not produce it. Breach of a legal contract without excuse is wrong
conduct, even if the contract is for labor, and if a state adds to civil liability a criminal liability to fine, it simply
intensifies the legal motive for doing right; it does not make the laborer a slave.
 10

But if a fine may be imposed, imprisonment may be

Page 219 U. S. 247

imposed in case of a failure to pay it. Nor does it matter if labor is added to the imprisonment. Imprisonment with
hard labor is not stricken from the statute books. On the contrary, involuntary servitude as a punishment for crime is
excepted from the prohibition of the Thirteenth Amendment in so many words. Also, the power of the states to make
breach of contract a crime is not done away with by the abolition of slavery. But if breach of contract may be made a
crime at all, it may be made a crime with all the consequences usually attached to crime. There is produced a sort of
illusion if a contract to labor ends in compulsory labor in a prison. But compulsory work for no private master in a
jail is not peonage. If work in a jail is not condemned in itself, without regard to what the conduct is it punishes, it
may be made a consequence of any conduct that the state has power to punish at all. I do not blink the fact that the
liability to imprisonment may work as a motive when a fine without it would not, and that it may induce the laborer
to keep on when he would like to leave. But it does not strike me as an objection to a law that it is effective. If the
contract is one that ought not to be made, prohibit it. But if it is a perfectly fair and proper contract, I can see no
reason why the state should not throw its weight on the side of performance. There is no relation between its doing
so in the manner supposed and allowing a private master to use private force upon a laborer who wishes to leave.

But all that I have said so far goes beyond the needs of the case as I understand it. I think it a mistake to say that this
statute attaches its punishment to the mere breach of a contract to labor. It does not purport to do so; what it purports
to punish is fraudulently obtaining money by a false pretense of an intent to keep the written contract in
consideration of which the money is advanced. (It is not necessary to cite cases to show that such an intent

Page 219 U. S. 248

may be the subject of a material false representation.) But the import of the statute is supposed to be changed by the
provision that a refusal to perform, coupled with a failure to return the money advanced, shall be prima facie
evidence of fraudulent intent. I agree that if the statute created a conclusive presumption, it might be held to make a
disguised change in the substantive law. Keller v. United States, 213 U. S. 138, 150. But it only makes the conduct
prima facie evidence -- a very different matter. Is it not evidence that a man had a fraudulent intent if he receives an
advance upon a contract over night and leaves in the morning? I should have thought that it very plainly was. Of
course, the statute is in general terms, and applies to a departure at any time without excuse or repayment, but that
does no harm except on a tacit assumption that this law is not administered as it would be in New York, and that
juries will act with prejudice against the laboring man. For prima facie evidence is only evidence, and as such may
be held by the jury insufficient to make out guilt. 161 Ala. 78. This was decided by the Supreme Court of Alabama
in this case, and we should be bound by their construction of the statute even if we thought it wrong. But I venture to
add that I think it entirely right. State v. Intoxicating Liquors, 80 Me. 57. This being so, I take it that a fair jury
would acquit, if the only evidence were a departure after eleven months' work, and if it received no color from some
special well known course of events. But the matter well may be left to a jury, because their experience as men of
the world may teach them that, in certain conditions, it is so common for laborers to remain during a part of the
season, receiving advances, and then to depart at the period of need, in the hope of greater wages at a neighboring
plantation, that, when a laborer follows that course, there is a fair inference of fact that he intended it from the
beginning. The Alabama statute,

Page 219 U. S. 249

as construed by the state court and as we must take it, merely says, as a court might say, that the prosecution may go
to the jury. This means, and means only, that the court cannot say, from its knowledge of the ordinary course of
events, that the jury could not be justified by its knowledge in drawing the inference from the facts proved. In my
opinion, the statute embodies little if anything more than what I should have told the jury was the law without it. The
right of the state to regulate laws of evidence is admitted, and the statute does not go much beyond the common law.
Commonwealth v. Rubin, 165 Mass. 453.

I do not see how the result that I have reached thus far is affected by the rule laid down by the Court, but not
contained in the statute, that the prisoner cannot testify to his uncommunicated intentions, and therefore, it is
assumed, would not be permitted to offer a naked denial of an intent to defraud. If there is an excuse for breaking the
contract, it will be found in external circumstances, and can be proved. So the sum of the wrong supposed to be
 11

inflicted is that the intent to go off without repaying may be put further back than it would be otherwise. But if there
is a wrong it lies in leaving the evidence to the jury -- a wrong that is not affected by the letting in or keeping out an
item of evidence on the other side. I have stated why I think it was not a wrong.

To sum up, I think that obtaining money by fraud may be made a crime as well as murder or theft; that a false
representation, expressed or implied, at the time of making a contract of labor, that one intends to perform it, and
thereby obtaining an advance, may be declared a case of fraudulently obtaining money as well as any other; that, if
made a crime, it may be punished like any other crime; and that an unjustified departure from the promised service
without repayment may be declared a sufficient case to go to the jury for their judgment -- all without in any

Page 219 U. S. 250

way infringing the Thirteenth Amendment or the statutes of the United States.

Mr. JUSTICE LURTON concurs in this dissent.

 12

Home Building & Loan Assn. v. Blaisdell, 290 U.S. 398 (1934)

Argued November 8, 9, 1933

Decided January 8, 1934

APPEAL FROM THE SUPREME COURT OF MINNESOTA

Syllabus

290 U. S. 399

14. A Minnesota statute, approved April 18, 1933, declares the existence of an emergency demanding an exercise of
the police power for the protection of the public and to promote the general welfare of the people, by temporarily
extending the time allowed by existing law for redeeming real property from foreclosure and sale under existing
mortgages. In support of this proposition, it recites: that a severe financial and economic depression has existed for
several years, resulting in extremely low prices for the products of farms and factories, in much unemployment, in
almost complete lack of credit for farmers, business men and property owners, and in extreme stagnation of
business, agriculture and industry; that many owners of real property, by reason of these conditions, are unable and,
it is believed, for some time will be unable, to meet all payments as they come due, of taxes, interest

Page 290 U. S. 400

and principal of mortgages, and are, therefore, threatened with the loss of their property through foreclosure sale;
that much property has been bid in on foreclosure for prices much below what it is believed was its real value, and
often for much less than the mortgage indebtedness, resulting in deficiency judgments; that, under the existing
conditions, foreclosure of many real estate mortgages by advertisement would prevent fair, open and competitive
bidding in the manner contemplated by law.

The Act then provides, inter alia, as to foreclosure sales, that, where the period for redemption has not already
expired, the mortgagor or owner in possession, by applying to a state court before its expiration, may obtain an
extension for such time as the court may deem just and equitable, but in no case beyond May 1, 1935. The
application is to be made on notice to the mortgagee. The court is to find the reasonable income or rental value of
the property, and, as a condition to any extension allowed, is to order the applicant to pay all, or a reasonable part, of
that value, in or towards the payment of taxes, insurance, interest and mortgage indebtedness, at such times and in
such manner as to the court, under all the circumstances, shall appear just and equitable. If the applicant default in
any payment so ordered, his right to redeem shall terminate in 30 days. The court is empowered to alter the terms of
extensions as change of conditions may require. The Act automatically extends, to 30 days from its date, redemption
periods which otherwise would expire within that time. It is to remain in effect only during the emergency, and in no
event beyond May 1, 1935. Prior to that date, no action shall be maintained for a deficiency judgment until the
period of redemption, as allowed by existing law or as extended under the Act, shall have expired.

In a proceeding under the statute, it appeared that the applicants, man and wife, owned a lot in a closely built section
of a large city on which were a house and garage; that they lived in part of the house and offered the remainder for
rent; that the reasonable present market value of the property was ,000, and the reasonable value of the income and
of the rental value, per month; that, on May 2, 1932, under a power of sale in a mortgage held by a building and loan
association, this property had been sold for ,700, the amount of the debt, and bid in by the mortgagee, leaving no
deficiency; that taxes and insurance since paid by the mortgagee increased this amount to ,056. The court extended
the period of redemption, which would have expired May 2, 1933, to May 1, 1935, upon condition that the
mortgagor

Page 290 U. S. 401

pay per month from date of sale throughout the extended period, to be applied on taxes, insurance, interest and
mortgage indebtedness. . . .

Page 290 U. S. 415

 13

APPEAL from a judgment which affirmed an order extending the period of redemption from a foreclosure and sale
of real property under a power of sale mortgage. The statute through which this relief was sought by the mortgagors
was at first adjudged to be unconstitutional by the trial court; but this was reversed by the state supreme court. The
present appeal, by the mortgagee, is from the second decision of that court, sustaining the trial court's final order.

MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.

Appellant contests the validity of Chapter 339 of the Laws of Minnesota of 1933, p. 514, approved April 18, 1933,
called the Minnesota Mortgage Moratorium Law,

Page 290 U. S. 416

as being repugnant to the contract clause (Art. I, § 10) and the due process and equal protection clauses of the
Fourteenth Amendment, of the Federal Constitution. The statute was sustained by the Supreme Court of Minnesota,
189 Minn. 422, 448, 249 N.W. 334, 893, and the case comes here on appeal.

The Act provides that, during the emergency declared to exist, relief may be had through authorized judicial
proceedings with respect to foreclosures of mortgages, and execution sales, of real estate; that sales may be
postponed and periods of redemption may be extended. The Act does not apply to mortgages subsequently made,
nor to those made previously which shall be extended for a period ending more than a year after the passage of the
Act (Part One, § 8). There are separate provisions in Part Two relating to homesteads, but these are to apply "only to
cases not entitled to relief under some valid provision of Part One." The Act is to remain in effect "only during the
continuance of the emergency and in no event beyond May 1, 1935." No extension of the period for redemption and
no postponement of sale is to be allowed which would have the effect of extending the period of redemption beyond
that date. Part Two, § 8.

The Act declares that the various provisions for relief are severable; that each is to stand on its own footing with
respect to validity. Part One, § 9. We are here concerned with the provisions of Part One, § 4, authorizing the
District Court of the county to extend the period of redemption from foreclosure sales "for such additional time as
the court may deem just and equitable," subject to the above described limitation. The extension is to be made upon
application to the court, on notice, for an order determining the reasonable value of the income on the property
involved in the sale, or, if it has no income, then the reasonable rental value of the property, and directing the
mortgagor

"to pay all or a reasonable part of such

Page 290 U. S. 417

income or rental value, in or toward the payment of taxes, insurance, interest, mortgage . . . indebtedness at such
times and in such manner"

as shall be determined by the court. [Footnote 1] The section also provides that the time for redemption

Page 290 U. S. 418

from foreclosure sales theretofore made, which otherwise would expire less than thirty days after the approval of the
Act shall be extended to a date thirty days after its approval, and application may be made to the court within that
time for a further extension as provided in the section. By another provision of the Act, no action, prior to May 1,
1935, may be maintained for a deficiency judgment until the period of redemption as allowed by existing law or as
extended under the provisions of the Act has expired. Prior to the expiration of the extended period of redemption,
the court may revise or alter the terms of the extension as changed circumstances may require. Part One, § 5.

Invoking the relevant provision of the statute, appellees applied to the District Court of Hennepin County for an
order extending the period of redemption from a foreclosure sale. Their petition stated that they owned a lot

Page 290 U. S. 419

 14

in Minneapolis which they had mortgaged to appellant; that the mortgage contained a valid power of sale by
advertisement and that, by reason of their default, the mortgage had been foreclosed and sold to appellant on May 2,
1932, for ,700.98; that appellant was the holder of the sheriff's certificate of sale; that, because of the economic
depression appellees had been unable to obtain a new loan or to redeem, and that, unless the period of redemption
were extended, the property would be irretrievably lost, and that the reasonable value of the property greatly
exceeded the amount due on the mortgage, including all liens, costs and expenses.

On the hearing, appellant objected to the introduction of evidence upon the ground that the statute was invalid under
the federal and state constitutions, and moved that the petition be dismissed. The motion was granted, and a motion
for a new trial was denied. On appeal, the Supreme Court of the State reversed the decision of the District Court.
189 Minn. 422, 249 N.W. 334. Evidence was then taken in the trial court, and appellant renewed its constitutional
objections without avail. The court made findings of fact setting forth the mortgage made by the appellees on
August 1, 1928, the power of sale contained in the mortgage, the default and foreclosure by advertisement, and the
sale to appellant on May 2, 1932, for ,700.98. The court found that the time to redeem would expire on May 2, 1933,
under the laws of the State as they were in effect when the mortgage was made and when it was foreclosed; that the
reasonable value of the income on the property, and the reasonable rental value, was a month; that the bid made by
appellant on the foreclosure sale, and the purchase price, were the full amount of the mortgage indebtedness, and
that there was no deficiency after the sale; that the reason

Page 290 U. S. 420

total amount of the purchase price, with taxes and insurance premiums subsequently paid by appellant, but exclusive
of interest from the date of sale, was ,056.39. The court also found that the property was situated in the closely built-
up portions of Minneapolis; that it had been improved by a two-car garage, together with a building two stories in
height which was divided into fourteen rooms; that the appellees, husband and wife, occupied the premises as their
homestead, occupying three rooms and offering the remaining rooms for rental to others.

The court entered its judgment extending the period of redemption to May 1, 1935, subject to the condition that the
appellees should pay to the appellant a month through the extended period from May 2, 1933, that is, that, in each of
the months of August, September, and October, 1933, the payments should be , in two instalments, and thereafter a
month, all these amounts to go to the payment of taxes, insurance, interest, and mortgage indebtedness. [Footnote 2]
It is this judgment, sustained by the Supreme Court of the State on the authority of its former opinion, which is here
under review. 189 Minn. 448, 249 N.W. 893.

The state court upheld the statute as an emergency measure. Although conceding that the obligations of the
mortgage contract were impaired, the court decided that what it thus described as an impairment was,
notwithstanding the contract clause of the Federal Constitution, within the police power of the State as that power
was called into exercise by the public economic emergency which the legislature had found to exist. Attention is
thus directed to the preamble and first section of the

Page 290 U. S. 421

statute, which described the existing emergency in terms that were deemed to justify the temporary relief which the
statute affords. [Footnote 3] The state court, declaring that it

Page 290 U. S. 422

could not say that this legislative finding was without basis, supplemented that finding by it own statement of
conditions of which it took judicial notice. The court said:

"In addition to the weight to be given the determination of the legislature that an economic emergency exists which
demands relief, the court must take notice of other considerations. The members of the legislature come from every
community of the state and from all the walks of life. They are familiar with conditions generally in every calling,
occupation, profession, and business in the state. Not only they but the courts must be guided by what is common
knowledge. It is common knowledge that, in the last few years, land values have shrunk enormously. Loans made a
few years ago upon the basis of the then going values cannot possibly be replaced on the basis of present values. We
all know that, when this law was enacted, the large financial companies which had made it their business to invest in
 15

mortgages had ceased to do so. No bank would directly or indirectly loan on real estate mortgages. Life insurance
companies, large investors in such mortgages, had even declared a moratorium as to the loan provisions of their
policy contracts. The President had closed banks temporarily. The Congress,

Page 290 U. S. 423

in addition to many extraordinary measures looking to the relief of the economic emergency, had passed an act to
supply funds whereby mortgagors may be able within a reasonable time to refinance their mortgages or redeem from
sales where the redemption has not expired. With this knowledge, the court cannot well hold that the legislature had
no basis in fact for the conclusion that an economic emergency existed which called for the exercise of the police
power to grant relief."

189 Minn. 429, 249 N.W. 336.

Justice Olsen of the state court, in a concurring opinion, added the following:

"The present nationwide and worldwide business and financial crisis has the same results as if it were caused by
flood, earthquake, or disturbance in nature. It has deprived millions of persons in this nation of their employment
and means of earning a living for themselves and their families; it has destroyed the value of and the income from all
property on which thousands of people depended for a living; it actually has resulted in the loss of their homes by a
number of our people and threatens to result in the loss of their homes by many other people, in this state; it has
resulted in such widespread want and suffering among our people that private, state, and municipal agencies are
unable to adequately relieve the want and suffering, and congress has found it necessary to step in and attempt to
remedy the situation by federal aid. Millions of the people's money were and are yet tied up in closed banks and in
business enterprises. [Footnote 4]"

189 Minn. 437, 249 N.W. 340.

Page 290 U. S. 424

We approach the questions thus presented upon the assumption made below, as required by the law of the State, that
the mortgage contained a valid power of sale to be exercised in case of default; that this power was validly
exercised; that, under the law then applicable, the period of redemption from the sale was one year, and that it has
been extended by the judgment of the court over the opposition of the mortgagee-purchaser, and that, during the
period thus extended, and unless the order for extension is modified, the mortgagee-purchaser will be unable to
obtain possession, or to obtain or convey title in fee, as he would have been able to do had the statute

Page 290 U. S. 425

not been enacted. The statute does not impair the integrity of the mortgage indebtedness. The obligation for interest
remains. The statute does not affect the validity of the sale or the right of a mortgagee-purchaser to title in fee, or his
right to obtain a deficiency judgment if the mortgagor fails to redeem within the prescribed period. Aside from the
extension of time, the other conditions of redemption are unaltered. While the mortgagor remains in possession, he
must pay the rental value as that value has been determined, upon notice and hearing, by the court. The rental value
so paid is devoted to the carrying of the property by the application of the required payments to taxes, insurance, and
interest on the mortgage indebtedness. While the mortgagee-purchaser is debarred from actual possession, he has, so
far as rental value is concerned, the equivalent of possession during the extended period.

In determining whether the provision for this temporary and conditional relief exceeds the power of the State by
reason of the clause in the Federal Constitution prohibiting impairment of the obligations of contracts, we must
consider the relation of emergency to constitutional power, the historical setting of the contract clause, the
development of the jurisprudence of this Court in the construction of that clause, and the principles of construction
which we may consider to be established.

Emergency does not create power. Emergency does not increase granted power or remove or diminish the
restrictions imposed upon power granted or reserved. The Constitution was adopted in a period of grave emergency.
Its grants of power to the Federal Government and its limitations of the power of the States were determined in the
 16

light of emergency, and they are not altered by emergency. What power was thus granted and what limitations were
thus imposed are questions

Page 290 U. S. 426

which have always been, and always will be, the subject of close examination under our constitutional system.

While emergency does not create power, emergency may furnish the occasion for the exercise of power.

"Although an emergency may not call into life a power which has never lived, nevertheless emergency may afford a
reason for the exertion of a living power already enjoyed."

Wilson v. New, 243 U. S. 332, 348. The constitutional question presented in the light of an emergency is whether the
power possessed embraces the particular exercise of it in response to particular conditions. Thus, the war power of
the Federal Government is not created by the emergency of war, but it is a power given to meet that emergency. It is
a power to wage war successfully, and thus it permits the harnessing of the entire energies of the people in a
supreme cooperative effort to preserve the nation. But even the war power does not remove constitutional limitations
safeguarding essential liberties. [Footnote 5] When the provisions of the Constitution, in grant or restriction, are
specific, so particularized as not to admit of construction, no question is presented. Thus, emergency would not
permit a State to have more than two Senators in the Congress, or permit the election of President by a general
popular vote without regard to the number of electors to which the States are respectively entitled, or permit the
States to "coin money" or to "make anything but gold and silver coin a tender in payment of debts." But where
constitutional grants and limitations of power are set forth in general clauses, which afford a broad outline, the
process of construction is essential to fill in the details. That is true of the contract clause. The necessity of
construction is not obviated by

Page 290 U. S. 427

the fact that the contract clause is associated in the same section with other and more specific prohibitions. Even the
grouping of subjects in the same clause may not require the same application to each of the subjects, regardless of
differences in their nature. See Groves v. Slaughter, 15 Pet. 449, 40 U. S. 505; Atlantic Cleaners & Dyers v. United
States, 286 U. S. 427, 434.

In the construction of the contract clause, the debates in the Constitutional Convention are of little aid. [Footnote 6]
But the reasons which led to the adoption of that clause, and of the other prohibitions of Section 10 of Article I, are
not left in doubt, and have frequently been described with eloquent emphasis. [Footnote 7] The widespread distress
following the revolutionary period, and the plight of debtors, had called forth in the States an ignoble array of
legislative schemes for the defeat of creditors and the invasion of contractual obligations. Legislative interferences
had been so numerous and extreme that the confidence essential to prosperous trade had been undermined and the
utter destruction of credit was threatened. "The sober people of America" were convinced that some "thorough
reform" was needed which would "inspire a general prudence and industry, and give a regular course to the business
of society." The Federalist, No. 44. It was necessary to interpose the restraining power of a central authority in order
to secure the foundations even of "private faith." The occasion and general purpose of

Page 290 U. S. 428

the contract clause are summed up in the terse statement of Chief Justice Marshall in Ogden v. Saunders, 12 Wheat.
p P. 213, 25 U. S. 354, 25 U. S. 355:

"The power of changing the relative situation of debtor and creditor, of interfering with contracts, a power which
comes home to every man, touches the interest of all, and controls the conduct of every individual in those things
which he supposes to be proper for his own exclusive management, had been used to such an excess by the state
legislatures, as to break in upon the ordinary intercourse of society, and destroy all confidence between man and
man. This mischief had become so great, so alarming, as not only to impair commercial intercourse and threaten the
existence of credit, but to sap the morals of the people and destroy the sanctity of private faith. To guard against the
continuance of the evil was an object of deep interest with all the truly wise, as well as the virtuous, of this great
community, and was one of the important benefits expected from a reform of the government."
 17

But full recognition of the occasion and general purpose of the clause does not suffice to fix its precise scope. Nor
does an examination of the details of prior legislation in the States yield criteria which can be considered controlling.
To ascertain the scope of the constitutional prohibition, we examine the course of judicial decisions in its
application. These put it beyond question that the prohibition is not an absolute one, and is not to be read with literal
exactness, like a mathematical formula. Justice Johnson, in Ogden v. Saunders, supra, P. 286, adverted to such a
misdirected effort in these words:

"It appears to me that a great part of the difficulties of the cause arise from not giving sufficient weight to the
general intent of this clause in the constitution and subjecting it to a severe literal construction which would be better
adapted to special pleadings."

And after giving his view as to the purport of the clause --

"that the States shall pass no law

Page 290 U. S. 429

attaching to the acts of individuals other effects or consequences than those attached to them by the laws existing at
their date, and all contracts thus construed shall be enforced according to their just and reasonable purport"

-- Justice Johnson added:

"But to assign to contracts, universally, a literal purport, and to exact for them a rigid literal fulfillment could not
have been the intent of the constitution. It is repelled by a hundred examples. Societies exercise a positive control as
well over the inception, construction and fulfillment of contracts as over the form and measure of the remedy to
enforce them."

The inescapable problems of construction have been: what is a contract? [Footnote 8] What are the obligations of
contracts? What constitutes impairment of these obligations? What residuum of power is there still in the States in
relation to the operation of contracts, to protect the vital interests of the community? Questions of this character,

"of no small nicety and intricacy, have vexed the legislative halls, as well as the judicial tribunals, with an uncounted
variety and frequency of litigation and speculation."

Story on the Constitution, § 1375.

The obligation of a contract is "the law which binds the parties to perform their agreement." Sturges v.
Crowninshield, 4 Wheat. 122, 17 U. S. 197; Story, op. cit., § 1378. This Court has said that

"the laws which subsist at the time and place of the making of a contract, and where it

Page 290 U. S. 430

is to be performed, enter into and form a part of it, as if they were expressly referred to or incorporated in its terms.
This principle embraces alike those which affect its validity, construction, discharge and enforcement. . . . Nothing
can be more material to the obligation than the means of enforcement. . . . The ideas of validity and remedy are
inseparable, and both are parts of the obligation, which is guaranteed by the Constitution against invasion."

Von Hoffman v. City of Quincy, 4 Wall. 535, 71 U. S. 550, 71 U. S. 552. See also Walker v. Whitehead, 16 Wall.
314, 83 U. S. 317. But this broad language cannot be taken without qualification. Chief Justice Marshall pointed out
the distinction between obligation and remedy. Sturges v. Crowninshield, supra, P. 200. Said he:

"The distinction between the obligation of a contract and the remedy given by the legislature to enforce that
obligation has been taken at the bar, and exists in the nature of things. Without impairing the obligation of the
contract, the remedy may certainly be modified as the wisdom of the nation shall direct."

And in Von Hoffman v. City of Quincy, supra, p P. 553, 71 U. S. 554, the general statement above quoted was
limited by the further observation that
 18

"It is competent for the States to change the form of the remedy, or to modify it otherwise, as they may see fit,
provided no substantial right secured by the contract is thereby impaired. No attempt has been made to fix definitely
the line between alterations of the remedy, which are to be deemed legitimate, and those which, under the form of
modifying the remedy, impair substantial rights. Every case must be determined upon its own circumstances."

And Chief Justice Waite, quoting this language in Antoni v. Greenhow, 107 U. S. 769, 775, added: "In all such
cases, the question becomes, therefore, one of reasonableness, and of that the legislature is primarily the judge."

Page 290 U. S. 431

The obligations of a contract are impaired by a law which renders them invalid, or releases or extinguishes them
[Footnote 9] (Sturges v. Crowninshield, supra, p P. 197, 17 U. S. 198) and impairment, as above noted, has been
predicated of laws which, without destroying contracts, derogate from substantial contractual rights. [Footnote 10]
In Sturges v. Crowninshield, supra, a state insolvent law which discharged the debtor from liability was held to be
invalid as applied to contracts in existence when the law was passed. See Ogden v. Saunders, supra. In Green v.
Biddle, 8 Wheat. 1, the legislative acts, which were successfully assailed, exempted the occupant of land from the
payment of rents and profits to the rightful owner and were

"parts of a system the object of which was to compel the rightful owner to relinquish his lands or pay for all lasting
improvements made upon them, without his consent or default."

In Bronson v. Kinzie, 1 How. 311, state legislation which had been enacted for the relief of debtors in view of the
seriously depressed condition of business [Footnote 11] following the panic of 1837, and which provided that the
equitable estate of the mortgagor should not be extinguished

Page 290 U. S. 432

for twelve months after sale on foreclosure, and further prevented any sale unless two-thirds of the appraised value
of the property should be bid therefor, was held to violate the constitutional provision. It will be observed that, in the
Bronson case, aside from the requirement as to the amount of the bid at the sale, the extension of the period of
redemption was unconditional, and there was no provision, as in the instant case, to secure to the mortgagee the
rental value of the property during the extended period. McCracken v. Hayward, 2 How. 608, Gantly's Lessee v.
Ewing, 3 How. 707, and Howard v. Bugbee, 24 How. 461, followed the decision in Bronson v. Kinzie; that of
McCracken, condemning a statute which provided that an execution sale should not be made of property unless it
would bring two-thirds of its value according to the opinion of three householders; that of Gantly's Lessee,
condemning a statute which required a sale for not less than one-half the appraised value, and that of Howard,
making a similar ruling as to an unconditional extension of two years for redemption from foreclosure sale. In
Planters' Bank v. Sharp, 6 How. 301, a state law was found to be invalid which prevented a bank from transferring
notes and bills receivable which it had been duly authorized to acquire. In Von Hoffman v. City of Quincy, supra., a
statute which restricted the power of taxation which had previously been given to provide for the payment of
municipal bonds was set aside. Louisiana v. Police Jury, 111 U. S. 716, and Seibert v. Lewis, 122 U. S. 284 are
similar cases.

In Walker v. Whitehead, 16 Wall. 314, the statute, which was held to be repugnant to the contract clause, was
enacted in 1870, and provided that, in all suits pending on any debt or contract made before June 1, 1865, the
plaintiff should not have a verdict unless it appeared that all taxes chargeable by law on the same had been

Page 290 U. S. 433

duly paid for each year since the contract was made, and further, that in all cases of indebtedness of the described
class, the defendant might offset any losses he had suffered in consequence of the late war either from destruction or
depreciation of property. See Daniels v. Tearney, 102 U. S. 415, 419. In Gunn v. Barry, 15 Wall. 610, and Edwards
v. Kearzey, 96 U. S. 595, statutes applicable to prior contracts were condemned because of increases in the amount
of the property of judgment debtors which were exempted from levy and sale on execution. But, in Penniman's
Case, 103 U. S. 714, 720, the Court decided that a statute abolishing imprisonment for debt did not, within the
meaning of the Constitution, impair the obligation of contracts previously made, [Footnote 12] and the Court said:
 19

"The general doctrine of this court on this subject may be thus stated: in modes of proceeding and forms to enforce
the contract, the legislature has the control, and may enlarge, limit, or alter them, provided it does not deny a remedy
or so embarrass it with conditions or restrictions as seriously to impair the value of the right."

In Barnitz v. Beverly, 163 U. S. 118, the Court held that a statute which authorized the redemption of property sold
on foreclosure, where no right of redemption previously existed, or which extended the period of redemption beyond
the time formerly allowed, could not constitutionally apply to a sale under a mortgage executed before its passage.
This ruling was to the same effect as that in Bronson v. Kinzie, supra, and Howard v. Bugbee, supra. But in the
Barnitz case, the statute contained a provision for the prevention of waste, and authorized the appointment of a
receiver of the premises sold. Otherwise, the extension of the period for redemption was unconditional, and, in case
a receiver was appointed,

Page 290 U. S. 434

the income during the period allowed for redemption, except what was necessary for repairs and to prevent waste,
was still to go to the mortgagor.

None of these case, and we have cited those upon which appellant chiefly relies, is directly applicable to the
question now before us in view of the conditions with which the Minnesota statute seeks to safeguard the interests of
the mortgagee-purchaser during the extended period. And broad expressions contained in some of these opinions
went beyond the requirements of the decision, and are not controlling. Cohens v. Virginia, 6 Wheat. 264, 19 U. S.
399.

Not only is the constitutional provision qualified by the measure of control which the State retains over remedial
processes, [Footnote 13] but the State also continues to possess authority to safeguard the vital interests of its
people. It does

Page 290 U. S. 435

not matter that legislation appropriate to that end "has the result of modifying or abrogating contracts already in
effect." Stephenson v. Binford, 287 U. S. 251, 276. Not only are existing laws read into contracts in order to fix
obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into
contracts as a postulate of the legal order. The policy of protecting contracts against impairment presupposes the
maintenance of a government by virtue of which contractual relations are worthwhile -- a government which retains
adequate authority to secure the peace and good order of society. This principle of harmonizing the constitutional
prohibition with the necessary residuum of state power has had progressive recognition in the decisions of this
Court.

While the charters of private corporations constitute contracts, a grant of exclusive privilege is not to be implied as
against the State. Charles River Bridge v. Warren Bridge, 11 Pet. 420. And all contracts are subject to the right of
eminent domain. West River Bridge v. Dix, 6 How. 507. [Footnote 14] The reservation of this necessary authority of
the State is deemed to be a part of the contract. In the case last cited, the Court answered the forcible challenge of
the State's power by the following statement of the controlling principle -- a statement reiterated by this Court
speaking through Mr. Justice Brewer, nearly fifty years later, in Long Island Water Supply Co. v. Brooklyn, 166 U.
S. 685, 692:

"But into all contracts, whether made between States and individuals, or between individuals only, there enter
conditions which arise not out of the literal

Page 290 U. S. 436

terms of the contract itself; they are superinduced by the preexisting and higher authority of the laws of nature, of
nations or of the community to which the parties belong; they are always presumed, and must be presumed, to be
known and recognized by all, are binding upon all, and need never, therefore, be carried into express stipulation, for
this could add nothing to their force. Every contract is made in subordination to them, and must yield to their
control, as conditions inherent and paramount, wherever a necessity for their execution shall occur."
 20

The legislature cannot "bargain away the public health or the public morals." Thus, the constitutional provision
against the impairment of contracts was held not to be violated by an amendment of the state constitution which put
an end to a lottery theretofore authorized by the legislature. Stone v. Mississippi, 101 U. S. 814, 819. See also
Douglas v. Kentucky, 168 U. S. 488, 497-499; compare New Orleans v. Houston, 119 U. S. 265, 275. The lottery
was a valid enterprise when established under express state authority, but the legislature, in the public interest, could
put a stop to it. A similar rule has been applied to the control by the State of the sale of intoxicating liquors. Beer
Co. v. Massachusetts, 97 U. S. 25, 32, 97 U. S. 33; see Mugler v. Kansas, 123 U. S. 623, 664, 123 U. S. 665. The
States retain adequate power to protect the public health against the maintenance of nuisances despite insistence
upon existing contracts. Fertilizing Co. v. Hyde Park, 97 U. S. 659, 667; Butchers' Union Co. v. Crescent City Co.,
111 U. S. 746, 750. Legislation to protect the public safety comes within the same category of reserved power.
Chicago, B. & Q. R. Co. v. Nebraska, 170 U. S. 57, 70, 170 U. S. 74; Texas & N.O. R. Co. v. Miller, 221 US. 408,
221 U. S. 414; Atlantic Coast Line R. Co. v. Goldsboro, 232 U. S. 548, 558. This principle has had recent and
noteworthy application to the regulation of the use of public highways by common carriers and "contract carriers,"
where the assertion of

Page 290 U. S. 437

interference with existing contract rights has been without avail. Sproles v. Binford, 286 U. S. 374, 390, 286 U. S.
391; Stephenson v. Binford, supra.

The economic interests of the State may justify the exercise of its continuing and dominant protective power
notwithstanding interference with contracts. In Manigault v. Springs, 199 U. S. 473, riparian owners in South
Carolina had made a contract for a clear passage through a creek by the removal of existing obstructions. Later, the
legislature of the State, by virtue of its broad authority to make public improvements, and in order to increase the
taxable value of the lowlands which would be drained, authorized the construction of a dam across the creek. The
Court sustained the statute upon the ground that the private interests were subservient to the public right. The Court
said (id., P. 480):

"It is the settled law of this court that the interdiction of statutes impairing the obligation of contracts does not
prevent the State from exercising such powers as are vested in it for the promotion of the common weal, or are
necessary for the general good of the public, though contracts previously entered into between individuals may
thereby be affected. This power, which in its various ramifications is known as the police power, is an exercise of
the sovereign right of the Government to protect the lives, health, morals, comfort and general welfare of the people,
and is paramount to any rights under contracts between individuals."

A statute of New Jersey prohibiting the transportation of water of the State into any other State was sustained against
the objection that the statute impaired the obligation of contracts which had been made for furnishing such water to
persons without the State. Hudson Water Co. v. McCarter, 209 U. S. 349. Said the Court, by Mr. Justice Holmes
(id., P. 357):

"One whose rights, such as they are, are subject to state restriction cannot remove them from the power of the State
by making

Page 290 U. S. 438

a contract about them. The contract will carry with it the infirmity of the subject matter."

The general authority of the legislature to regulate, and thus to modify, the rates charged by public service
corporations affords another illustration. Stone v. Farmers Loan & Trust Co., 116 U. S. 307, 325, 116 U. S. 326. In
Union Dry Goods Co. v. Georgia Public Service Corp., 248 U. S. 372, a statute fixing reasonable rates, to be
charged by a corporation for supplying electricity to the inhabitants of a city, superseded lower rates which had been
agreed upon by a contract previously made for a definite term between the company and a consumer. The validity of
the statute was sustained. To the same effect are Producers Transportation Co. v. Railroad Comm'n, 251 U. S. 228,
232, and Sutter Butte Canal Co. v. Railroad Comm'n, 279 U. S. 125, 138. Similarly, where the protective power of
the State is exercised in a manner otherwise appropriate in the regulation of a business it is no objection that the
performance of existing contracts may be frustrated by the prohibition of injurious practices. Rast v. Van Deman &
Lewis Co., 240 U. S. 342, 363; see also St. Louis Poster Advertising Co. v. St. Louis, 249 U. S. 269, 274.
 21

The argument is pressed that, in the cases we have cited, the obligation of contracts was affected only incidentally.
This argument proceeds upon a misconception. The question is not whether the legislative action affects contracts
incidentally, or directly, or indirectly, but whether the legislation is addressed to a legitimate end and the measures
taken are reasonable and appropriate to that end. Another argument, which comes more closely to the point, is that
the state power may be addressed directly to the prevention of the enforcement of contracts only when these are of a
sort which the legislature in its discretion may denounce as being in themselves hostile to public morals, or public
health, safety or welfare, or

Page 290 U. S. 439

where the prohibition is merely of injurious practices; that interference with the enforcement of other and valid
contracts according to appropriate legal procedure, although the interference is temporary and for a public purpose,
is not permissible. This is but to contend that, in the latter case, the end is not legitimate in the view that it cannot be
reconciled with a fair interpretation of the constitutional provision.

Undoubtedly, whatever is reserved of state power must be consistent with the fair intent of the constitutional
limitation of that power. The reserved power cannot be construed so as to destroy the limitation, nor is the limitation
to be construed to destroy the reserved power in its essential aspects. They must be construed in harmony with each
other. This principle precludes a construction which would permit the State to adopt as its policy the repudiation of
debts or the destruction of contracts or the denial of means to enforce them. But it does not follow that conditions
may not arise in which a temporary restraint of enforcement may be consistent with the spirit and purpose of the
constitutional provision, and thus be found to be within the range of the reserved power of the State to protect the
vital interests of the community. It cannot be maintained that the constitutional prohibition should be so construed as
to prevent limited and temporary interpositions with respect to the enforcement of contracts if made necessary by a
great public calamity such as fire, flood, or earthquake. See American Land Co. v. Zeiss, 219 U. S. 47. The
reservation of state power appropriate to such extraordinary conditions may be deemed to be as much a part of all
contracts as is the reservation of state power to protect the public interest in the other situations to which we have
referred. And if state power exists to give temporary relief from the enforcement of contracts in the presence of
disasters due to physical causes such as fire, flood or earthquake, that

Page 290 U. S. 440

power cannot be said to be nonexistent when the urgent public need demanding such relief is produced by other and
economic causes.

Whatever doubt there may have been that the protective power of the State, its police power, may be exercised --
without violating the true intent of the provision of the Federal Constitution -- in directly preventing the immediate
and literal enforcement of contractual obligations, by a temporary and conditional restraint, where vital public
interests would otherwise suffer, was removed by our decisions relating to the enforcement of provisions of leases
during a period of scarcity of housing. Block v. Hirsh, 256 U. S. 135; Marcus Brown Holding Co. v. Feldman, 256
U. S. 170; Edgar A. Levy Leasing Co. v. Siegel, 258 U. S. 242. The case of Block v. Hirsh, supra, arose in the
District of Columbia, and involved the due process clause of the Fifth Amendment. The cases of the Marcus Brown
Company and the Levy Leasing Company arose under legislation of New York, and the constitutional provision
against the impairment of the obligation of contracts was invoked. The statutes of New York, [Footnote 15]
declaring that a public emergency existed, directly interfered with the enforcement of covenants for the surrender of
the possession of premises on the expiration of leases. Within the City of New York and contiguous counties, the
owners of dwellings, including apartment and tenement houses (but excepting buildings under construction in
September, 1920, lodging houses for transients and the larger hotels), were wholly deprived until November 1, 1922,
of all possessory remedies for the purpose of removing from their premises the tenants or occupants in possession
when the laws took effect (save in certain specified instances), providing the tenants or occupants were ready, able
and willing to pay a reasonable rent or price for their use and

Page 290 U. S. 441

occupation. People v. La Fetra, 230 N.Y. 429, 438, 130 N.E. 601; Levy Leasing Co. v. Siegel, id. 634, 130 N.E. 923.
In the case of the Marcus Brown Company, the facts were thus stated by the District Court (269 Fed. 306, 312):
 22

"the tenant defendants herein, by law older than the state of New York, became at the landlord's option trespassers
on October 1, 1920. Plaintiff had then found and made a contract with a tenant it liked better, and had done so before
these statutes were enacted. By them plaintiff is, after defendants elected to remain in possession, forbidden to carry
out his bargain with the tenant he chose, the obligation of the covenant for peaceable surrender by defendants is
impaired, and, for the next two years, Feldman et al. may, if they like, remain in plaintiff's apartment, provided they
make good month by month the allegation of their answer, i.e., pay what 'a court of competent jurisdiction' regards
as fair and reasonable compensation for such enforced use and occupancy."

Answering the contention that the legislation, as thus applied, contravened the constitutional prohibition, this Court,
after referring to its opinion in Block v. Hirsh, supra, said:

"In the present case, more emphasis is laid upon the impairment of the obligation of the contract of the lessees to
surrender possession and of the new lease which was to have gone into effect upon October 1, last year. But
contracts are made subject to this exercise of the power of the State when otherwise justified, as we have held this to
be."

256 U.S. P. 198. This decision was followed in the case of the Levy Leasing Company, supra.

In these cases of leases, it will be observed that the relief afforded was temporary and conditional, that it was
sustained because of the emergency due to scarcity of housing, and that provision was made for reasonable
compensation to the landlord during the period he was

Page 290 U. S. 442

prevented from regaining possession. The Court also decided that, while the declaration by the legislature as to the
existence of the emergency was entitled to great respect, it was not conclusive, and, further, that a law

"depending upon the existence of an emergency or other certain state of facts to uphold it may cease to operate if the
emergency ceases or the facts change even though valid when passed."

It is always open to judicial inquiry whether the exigency still exists upon which the continued operation of the law
depends. Chastleton Corp. v. Sinclair, 264 U. S. 543, 547, 264 U. S. 548.

It is manifest from this review of our decisions that there has been a growing appreciation of public needs and of the
necessity of finding ground for a rational compromise between individual rights and public welfare. The settlement
and consequent contraction of the public domain, the pressure of a constantly increasing density of population, the
interrelation of the activities of our people and the complexity of our economic interests, have inevitably led to an
increased use of the organization of society in order to protect the very bases of individual opportunity. Where, in
earlier days, it was thought that only the concerns of individuals or of classes were involved, and that those of the
State itself were touched only remotely, it has later been found that the fundamental interests of the State are directly
affected, and that the question is no longer merely that of one party to a contract as against another, but of the use of
reasonable means to safeguard the economic structure upon which the good of all depends.

It is no answer to say that this public need was not apprehended a century ago, or to insist that what the provision of
the Constitution meant to the vision of that day it must mean to the vision of our time. If, by the statement that what
the Constitution meant at the time

Page 290 U. S. 443

of its adoption it means today, it is intended to say that the great clauses of the Constitution must be confined to the
interpretation which the framers, with the conditions and outlook of their time, would have placed upon them, the
statement carries its own refutation. It was to guard against such a narrow conception that Chief Justice Marshall
uttered the memorable warning -- "We must never forget that it is a constitution we are expounding" (McCulloch v.
Maryland, 4 Wheat. 316, 17 U. S. 407) -- "a constitution intended to endure for ages to come, and, consequently, to
be adapted to the various crises of human affairs." Id., P. 415. When we are dealing with the words of the
Constitution, said this Court in Missouri v. Holland, 252 U. S. 416, 433,
 23

"we must realize that they have called into life a being the development of which could not have been foreseen
completely by the most gifted of its begetters. . . . The case before us must be considered in the light of our whole
experience, and not merely in that of what was said a hundred years ago."

Nor is it helpful to attempt to draw a fine distinction between the intended meaning of the words of the Constitution
and their intended application. When we consider the contract clause and the decisions which have expounded it in
harmony with the essential reserved power of the States to protect the security of their peoples, we find no warrant
for the conclusion that the clause has been warped by these decisions from its proper significance, or that the
founders of our Government would have interpreted the clause differently had they had occasion to assume that
responsibility in the conditions of the later day. The vast body of law which has been developed was unknown to the
fathers, but it is believed to have preserved the essential content and the spirit of the Constitution. With a growing
recognition of public needs

Page 290 U. S. 444

and the relation of individual right to public security, the court has sought to prevent the perversion of the clause
through its use as an instrument to throttle the capacity of the States to protect their fundamental interests. This
development is a growth from the seeds which the fathers planted. It is a development forecast by the prophetic
words of Justice Johnson in Ogden v. Saunders, already quoted. And the germs of the later decisions are found in
the early cases of the Charles River Bridge and the West River Bridge, supra, which upheld the public right against
strong insistence upon the contract clause. The principle of this development is, as we have seen, that the reservation
of the reasonable exercise of the protective power of the State is read into all contracts, and there is no greater reason
for refusing to apply this principle to Minnesota mortgages than to New York leases.

Applying the criteria established by our decisions we conclude:

1. An emergency existed in Minnesota which furnished a proper occasion for the exercise of the reserved power of
the State to protect the vital interests of the community. The declarations of the existence of this emergency by the
legislature and by the Supreme Court of Minnesota cannot be regarded as a subterfuge, or as lacking in adequate
basis. Block v. Hirsh, supra. The finding of the legislature and state court has support in the facts of which we take
judicial notice. Atchison, T. & S.F. Ry. Co. v. United States, 284 U. S. 248, 260. It is futile to attempt to make a
comparative estimate of the seriousness of the emergency shown in the leasing cases from New York and of the
emergency disclosed here. The particular facts differ, but that there were in Minnesota conditions urgently
demanding relief, if power existed to give it, is beyond cavil. As the Supreme Court of Minnesota said, the economic
emergency which threatened "the

Page 290 U. S. 445

loss of homes and lands which furnish those in possession the necessary shelter and means of subsistence" was a
"potent cause" for the enactment of the statute.

2. The legislation was addressed to a legitimate end, that is, the legislation was not for the mere advantage of
particular individuals, but for the protection of a basic interest of society.

3. In view of the nature of the contracts in question -- mortgages of unquestionable validity -- the relief afforded and
justified by the emergency, in order not to contravene the constitutional provision, could only be of a character
appropriate to that emergency, and could be granted only upon reasonable conditions.

4. The conditions upon which the period of redemption is extended do not appear to be unreasonable. The initial
extension of the time of redemption for thirty days from the approval of the Act was obviously to give a reasonable
opportunity for the authorized application to the court. As already noted, the integrity of the mortgage indebtedness
is not impaired; interest continues to run; the validity of the sale and the right of a mortgagee-purchaser to title or to
obtain a deficiency judgment if the mortgagor fails to redeem within the extended period are maintained, and the
conditions of redemption, if redemption there be, stand as they were under the prior law. The mortgagor, during the
extended period, is not ousted from possession, but he must pay the rental value of the premises as ascertained in
judicial proceedings, and this amount is applied to the carrying of the property and to interest upon the indebtedness.
The mortgagee-purchaser, during the time that he cannot obtain possession, thus is not left without compensation for
 24

the withholding of possession. Also important is the fact that mortgagees, as is shown by official reports of which
we may take notice, are predominantly corporations, such as

Page 290 U. S. 446

insurance companies, banks, and investment and mortgage companies. [Footnote 16] These, and such individual
mortgagees as are small investors, are not seeking homes or the opportunity to engage in farming. Their chief
concern is the reasonable protection of their investment security. It does not matter that there are, or may be,
individual cases of another aspect. The legislature was entitled to deal with the general or typical situation. The
relief afforded by the statute has regard to the interest of mortgagees as well as to the interest of mortgagors. The
legislation seeks to prevent the impending ruin of both by a considerate measure of relief.

In the absence of legislation, courts of equity have exercised jurisdiction in suits for the foreclosure of mortgages to
fix the time and terms of sale and to refuse to confirm sales upon equitable grounds where they were found to be
unfair or inadequacy of price was so gross as to shock the conscience. [Footnote 17] The "equity of redemption" is
the creature of equity. While courts of equity could not alter the legal effect of the forfeiture of the estate at common
law on breach of condition, they succeeded, operating on the conscience of the mortgagee, in maintaining that it was
unreasonable that he should retain for his own benefit what was intended as a mere security; that the breach of
condition was in the nature of a penalty, which ought to be relieved against, and that the mortgagor had an equity to
redeem on payment of principal, interest and costs,

Page 290 U. S. 447

notwithstanding the forfeiture at law. This principle of equity was victorious against the strong opposition of the
common law judges, who thought that, by "the Growth of Equity on Equity, the Heart of the Common Law is eaten
out." The equitable principle became firmly established, and its application could not be frustrated even by the
engagement of the debtor entered into at the time of the mortgage, the courts applying the equitable maxim "once a
mortgage, always a mortgage, and nothing but a mortgage." [Footnote 18] Although the courts would have no
authority to alter a statutory period of redemption, the legislation in question permits the courts to extend that period,
within limits and upon equitable terms, thus providing a procedure and relief which are cognate to the historic
exercise of the equitable jurisdiction. If it be determined, as it must be, that the contract clause is not an absolute and
utterly unqualified restriction of the State's protective power, this legislation is clearly so reasonable as to be within
the legislative competency.

5. The legislation is temporary in operation. It is limited to the exigency which called it forth. While the
postponement of the period of redemption from the foreclosure sale is to May 1, 1935, that period may be reduced
by the order of the court under the statute, in case of a change in circumstances, and the operation of the statute itself
could not validly outlast the emergency or be so extended as virtually to destroy the contracts.

We are of the opinion that the Minnesota statute, as here applied, does not violate the contract clause of the Federal
Constitution. Whether the legislation is wise or

Page 290 U. S. 448

unwise as a matter of policy is a question with which we are not concerned.

What has been said on that point is also applicable to the contention presented under the due process clause. Block v.
Hirsh, supra.

Nor do we think that the statute denies to the appellant the equal protection of the laws. The classification which the
statute makes cannot be said to be an arbitrary one. Magoun v. Illinois Trust & Savings Bank, 170 U. S. 283; Clark
v. Titusville, 184 U. S. 329; Quong Wing v. Kirkendall, 223 U. S. 59; Ohio Oil Co. v. Conway, 281 U. S. 146;
Sproles v. Binford, 286 U. S. 374.

The judgment of the Supreme Court of Minnesota is affirmed.

Judgment affirmed.
 25

A. L. A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935)

Argued May 2, 3, 1935

Decided May 27, 1935*

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT

Syllabus

. . . 5. Section 3 of the National Industrial Recovery Act provides that "codes of fair competition," which shall be the
" standards of fair competition" for the trades and industries to which they relate, may be approved by the President
upon application of representative associations of the trades or industries to be affected, or may be prescribed by him
on his own motion. Their provisions

Page 295 U. S. 496

are to be enforced by injunctions from the federal courts, and "any violation of any of their provisions in any
transaction in or affecting interstate commerce" is to be deemed an unfair method of competition within the meaning
of the Federal Trade Commission Act, and is to be punished as a crime against the United States. Before approving,
the President is to make certain findings as to the character of the association presenting the code and absence of
design to promote monopoly or oppress small enterprises, and must find that it will "tend to effectuate the policy of
this title." Codes permitting monopolies or monopolistic practices are forbidden. The President may "impose such
conditions (including requirements for the making of reports and the keeping of accounts) for the protection of
consumers, competitors, employees and others, and in the furtherance of the public interest, and may provide such
exceptions and exemptions from the provisions of such code," as he, in his discretion, deems necessary "to
effectuate the policy herein declared." A code prescribed by him is to have the same effect as one approved on
application. . . .

Page 295 U. S. 518

. . . CERTIORARI on the petition of defendants in a criminal case to review the judgment below insofar as it
affirmed convictions on a number of the counts of an indictment and, on the petition of the Government, to review
the same judgment insofar as it reversed convictions on other counts. The indictment charged violations of a "Live
Poultry Code," and conspiracy to commit them.

Page 295 U. S. 519

MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.

Petitioners in No. 854 were convicted in the District Court of the United States for the Eastern District of New York
on eighteen count of an indictment charging violations of what is known a the "Live Poultry Code," [Footnote 1]
and on an additional count for conspiracy to commit such violations. [Footnote 2] By demurrer to the indictment and
appropriate motions on the trial, the defendants contended (1) that the Code had been adopted pursuant to an
unconstitutional delegation by Congress of legislative power; (2) that it attempted to regulate intrastate transactions
which lay outside the authority of Congress, and (3) that, in certain provisions, it was repugnant to the due process
clause of the Fifth Amendment.

Page 295 U. S. 520

The Circuit Court of Appeals sustained the conviction on the conspiracy count and on sixteen counts for violation of
the Code, but reversed the conviction on two counts which charged violation of requirements as to minimum wages
and maximum hours of labor, as these were not deemed to be within the congressional power of regulation. On the
respective applications of the defendants (No. 854) and of the Government (No. 864), this Court granted writs of
certiorari, April 15, 1935.

New York City is the largest live poultry market in the United States. Ninety-six percent. of the live poultry there
marketed comes from other States. Three-fourths of this amount arrives by rail and is consigned to commission men
 26

or receivers. Most of these freight shipments (about 75 percent) come in at the Manhattan Terminal of the New York
Central Railroad, and the remainder at one of the four terminals in New Jersey serving New York City. The
commission men transact by far the greater part of the business on a commission basis, representing the shippers as
agents and remitting to them the proceeds of sale, less commissions, freight and handling charges. Otherwise, they
buy for their own account. They sell to slaughterhouse operators, who are also called marketmen.

The defendants are slaughterhouse operators of the latter class. A. L. A. Schechter Poultry Corporation and
Schechter Live Poultry Market are corporations conducting wholesale poultry slaughterhouse markets in Brooklyn,
New York City. Joseph Schechter operated the latter corporation and also guaranteed the credits of the former
corporation which was operated by Martin, Alex and Aaron Schechter. Defendants ordinarily purchase their live
poultry from commission men at the West Washington Market in New York City or at the railroad terminals serving
the City, but occasionally they purchase from commission men in Philadelphia. They buy the

Page 295 U. S. 521

poultry for slaughter and resale. After the poultry is trucked to their slaughterhouse markets in Brooklyn, it is there
sold, usually within twenty-four hours, to retail poultry dealers and butchers who sell directly to consumers. The
poultry purchased from defendants is immediately slaughtered, prior to delivery, by schochtim in defendants'
employ. Defendants do not sell poultry in interstate commerce.

The "Live Poultry Code" was promulgated under § 3 of the National Industrial Recovery Act. [Footnote 3] That
section -- the pertinent provisions of which are set forth in the margin [Footnote 4] -- authorizes the President to
approve "codes of

Page 295 U. S. 522

fair competition." Such a code may be approved for a trade or industry, upon application by one or more trade or
industrial associations or groups, if the President finds (1) that such associations or groups "impose no inequitable
restrictions on admission to membership therein and are truly representative," and (2) that such codes are not
designed

"to promote monopolies or to eliminate or oppress small enterprises and will not operate to discriminate

Page 295 U. S. 523

against them, and will tend to effectuate the policy"

of Title I of the Act. Such codes "shall not permit monopolies or monopolistic practices." As a condition of his
approval, the President may

"impose such conditions (including requirements for the making of reports and the keeping of accounts) for the
protection of consumers, competitors, employees, and others, and in furtherance of the public interest, and may
provide such exceptions to and exemptions from the provisions of such code, as the President in his discretion
deems necessary to effectuate the policy herein declared."

Where such a code has not been approved, the President may prescribe one, either on his own motion or on
complaint. Violation of any provision of a code (so approved or prescribed) "in any transaction in or affecting
interstate or foreign commerce" is made a misdemeanor punishable by a fine of not more than 0 for each offense,
and each day the violation continues is to be deemed a separate offense.

The "Live Poultry Code" was approved by the President on April 13, 1934. Its divisions indicate its nature and
scope. The Code has eight articles entitled (1) purposes, (2) definitions, (3) hours, (4) wages, (5) general labor
provisions, (6) administration, (7) trade practice provisions, and (8) general.

The declared purpose is "To effect the policies of title I of the National Industrial Recovery Act." The Code is
established as "a code of fair competition for the live poultry industry of the metropolitan area in and about the City
of New York." That area is described as embracing the five boroughs of New York City, the counties of Rockland,
 27

Westchester, Nassau and Suffolk in the State of New York, the counties of Hudson and Bergen in the State of New
Jersey, and the county of Fairfield in the State of Connecticut.

The "industry" is defined as including

"every person engaged in the business of selling, purchasing for resale,

Page 295 U. S. 524

transporting, or handling and/or slaughtering live poultry, from the time such poultry comes into the New York
metropolitan area to the time it is first sold in slaughtered form,"

and such " related branches " as may from time to time be included by amendment. Employers are styled "members
of the industry," and the term employee is defined to embrace "any and all persons engaged in the industry, however
compensated," except "members."

The Code fixes the number of hours for workdays. It provides that no employee, with certain exceptions, shall be
permitted to work in excess of forty (40) hours in any one week, and that no employee, save as stated, "shall be paid
in any pay period less than at the rate of fifty (50) cents per hour." The article containing " general labor provisions"
prohibits the employment of any person under sixteen years of age, and declares that employees shall have the right
of "collective bargaining," and freedom of choice with respect to labor organizations, in the terms of § 7(a) of the
Act. The minimum number of employees who shall be employed by slaughterhouse operators is fixed, the number
being graduated according to the average volume of weekly sales.

Provision is made for administration through an "industry advisory committee," to be selected by trade associations
and members of the industry, and a "code supervisor," to be appointed, with the approval of the committee, by
agreement between the Secretary of Agriculture and the Administrator for Industrial Recovery. The expenses of
administration are to be borne by the members of the industry proportionately upon the basis of volume of business,
or such other factors as the advisory committee may deem equitable, "subject to the disapproval of the Secretary
and/or Administrator."

The seventh article, containing "trade practice provisions," prohibits various practices which are said to constitute

Page 295 U. S. 525

"unfair methods of competition." The final article provides for verified reports, such as the Secretary or
Administrator may require,

"(1) for the protection of consumers, competitors, employees, and others, and in furtherance of the public interest,
and (2) for the determination by the Secretary or Administrator of the extent to which the declared policy of the act
is being effectuated by this code."

The members of the industry are also required to keep books and records which "will clearly reflect all financial
transactions of their respective business and the financial condition thereof," and to submit weekly reports showing
the range of daily prices and volume of sales for each kind of produce.

The President approved the Code by an executive order in which he found that the application for his approval had
been duly made in accordance with the provisions of Title I of the National Industrial Recovery Act, that there had
been due notice and hearings, that the Code constituted "a code of fair competition" as contemplated by the Act, and
complied with its pertinent provisions, including clauses (1) and (2) of subsection (a) of § 3 of Title I, and that the
Code would tend "to effectuate the policy of Congress as declared in section 1 of Title I." [Footnote 5]

Page 295 U. S. 526

The executive order also recited that Secretary of Agriculture and the Administrator of the National Industrial
Recovery Act had rendered separate reports as to the provisions within their respective jurisdictions. The Secretary
of Agriculture reported that the provisions of the Code
 28

"establishing standards of fair competition (a) are regulations of transactions in or affecting the current of interstate
and/or foreign commerce and (b) are reasonable, "

Page 295 U. S. 527

and also that the Code would tend to effectuate the policy declared in Title I of the Act, as set forth in § 1. The report
of the Administrator for Industrial Recovery dealt with wages, ours of labor and other labor provisions. [Footnote 6]

Of the eighteen counts of the indictment upon which the defendants were indicted, aside from the count for
conspiracy, two counts charged violation of the minimum wage and maximum hour provisions of the Code, and ten
counts were for violation of the requirement (found in the "trade practice provisions") of "straight killing." This
requirement was really one of "straight" selling. The term "straight killing" was defined in the Code as

"the practice of requiring persons purchasing poultry for resale to accept the run of any half coop, coop, or coops, as
purchased by slaughterhouse operators, except for culls. [Footnote 7]"

The charges in the ten counts, respectively, were

Page 295 U. S. 528

that the defendants, in selling to retail dealers and butchers, had permitted "selections of individual chickens taken
from particular coops and half-coops."

Of the other six counts, one charged the sale to a butcher of an unfit chicken; two counts charged the making of sales
without having the poultry inspected or approved in accordance with regulations or ordinances of the City of New
York; two counts charged the making of false reports or the failure to make report relating to the range of daily
prices and volume of sales for certain periods, and the remaining count was for sales to slaughterers or dealers who
were without licenses required by the ordinances and regulations of the City of New York.

First. Two preliminary points are stressed by the Government with respect to the appropriate approach to the
important questions presented. We are told that the provision of the statute authorizing the adoption of codes must
be viewed in the light of the grave national crisis with which Congress was confronted. Undoubtedly, the conditions
to which power is addressed are always to be considered when the exercise of power is challenged. Extraordinary
conditions may call for extraordinary remedies. But the argument necessarily stops short of an attempt to justify
action which lies outside the sphere of constitutional authority. Extraordinary conditions do not create or enlarge
constitutional power. [Footnote 8] The Constitution established a national government with powers deemed to be
adequate, as they have proved to be both in war and peace, but these powers of the national government are limited
by the constitutional grants. Those who act under these grants are not at liberty to transcend the

Page 295 U. S. 529

imposed limits because they believe that more or different power is necessary. Such assertions of extraconstitutional
authority were anticipated and precluded by the explicit terms of the Tenth Amendment --

"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to
the States respectively, or to the people."

The further point is urged that the national crisis demanded a broad and intensive cooperative effort by those
engaged in trade and industry, and that this necessary cooperation was sought to be fostered by permitting them to
initiate the adoption of codes. But the statutory plan is not simply one for voluntary effort. It does not seek merely to
endow voluntary trade or industrial associations or groups with privileges or immunities. It involves the coercive
exercise of the lawmaking power. The codes of fair competition which the state attempts to authorize are codes of
laws. If valid, they place all persons within their reach under the obligation of positive law, binding equally those
who assent and those who do not assent. Violations of the provisions of the codes are punishable as crimes.
 29

Second. The question of the delegation of legislative power. We recently had occasion to review the pertinent
decisions and the general principles which govern the determination of this question. Panama Refining Co. v. Ryan,
293 U. S. 388. The Constitution provides that

"All legislative powers herein granted shall be vested in a Congress of the United States, which shall consist of a
Senate and House of Representatives."

Art I, § 1. And the Congress is authorized "To make all laws which shall be necessary and proper for carrying into
execution" its general powers. Art. I, 8, par. 18. The Congress is not permitted to abdicate or to transfer to others the
essential legislative functions with which it is thus vested. We have repeatedly recognized the necessity of adapting

Page 295 U. S. 530

legislation to complex conditions involving a host of details with which the national legislature cannot deal directly.
We pointed out in the Panama Company case that the Constitution has never been regarded as denying to Congress
the necessary resources of flexibility and practicality which will enable it to perform its function in laying down
policies and establishing standards while leaving to selected instrumentalities the making of subordinate rules within
prescribed limits, and the determination of facts to which the policy, as declared by the legislature, is to apply. But
we said that the constant recognition of the necessity and validity of such provisions, and the wide range of
administrative authority which has been developed by means of them, cannot be allowed to obscure the limitations
of the authority to delegate, if our constitutional system is to be maintained. Id., P. 421.

Accordingly, we look to the statute to see whether Congress has overstepped these limitations -- whether Congress,
in authorizing "codes of fair competition," has itself established the standards of legal obligation, thus performing its
essential legislative function, or, by the failure to enact such standards, has attempted to transfer that function to
others.

The aspect in which the question is now presented is distinct from that which was before us in the case of the
Panama Company. There, the subject of the statutory prohibition was defined. National Industrial Recovery Act, §
9(c). That subject was the transportation in interstate and foreign commerce of petroleum and petroleum products
which are produced or withdrawn from storage in excess of the amount permitted by State authority. The question
was with respect to the range of discretion given to the President in prohibiting that transportation. Id. p P. 414, 293
U. S. 415, 293 U. S. 430. As to the "codes of fair competition," under § 3 of the Act, the question is more
fundamental.

Page 295 U. S. 531

It is whether there is any adequate definition of the subject to which the codes are to be addressed.

What is meant by "fair competition" as the term is used in the Act? Does it refer to a category established in the law,
and is the authority to make codes limited accordingly? Or is it used as a convenient designation for whatever set of
laws the formulators of a code for a particular trade or industry may propose and the President may approve (subject
to certain restrictions), or the President may himself prescribe, as being wise and beneficent provisions for the
government of the trade or industry in order to accomplish the broad purposes of rehabilitation, correction and
expansion which are stated in the first section of Title I? [Footnote 9]

The Act does not define " fair competition." "Unfair competition," as known to the common law, is a limited
concept. Primarily, and strictly, it relates to the palming off of one's goods as those of a rival trader. Goodyear
Manufacturing Co. v. Goodyear Rubber Co., 128 U. S. 598,

Page 295 U. S. 532

128 U. S. 604; Howe Scale Co. v. Wyckoff, Seaman & Benedict, 198 U. S. 118, 140; Hanover Milling Co. v.
Metcalf, 240 U. S. 403, 413. In recent years, its scope has been extended. It has been held to apply to
misappropriation as well as misrepresentation, to the selling of another's goods as one's own -- to misappropriation
of what equitably belongs to a competitor. International News Service v. Associated Press, 248 U. S. 215, 241, 248
U. S. 242. Unfairness in competition has been predicated of acts which lie outside the ordinary course of business
 30

and are tainted by fraud, or coercion, or conduct otherwise prohibited by law. [Footnote 10] Id., P. 258. But it is
evident that, in its widest range, "unfair competition," as it has been understood in the law, does not reach the
objectives of the codes which are authorized by the National Industrial Recovery Act. The codes may, indeed, cover
conduct which existing law condemns, but they are not limited to conduct of that sort. The Government does not
contend that the Act contemplates such a limitation. It would be opposed both to the declared purposes of the Act
and to its administrative construction.

The Federal Trade Commission Act (§ 5) [Footnote 11] introduced the expression "unfair methods of competition,"
which were declared to be unlawful. That was an expression new in the law. Debate apparently convinced the
sponsors of the legislation that the words "unfair competition," in the light of their meaning at common law, were
too narrow. We have sad that the substituted phrase has a broader meaning, that it does not admit of precise
definition, its scope being left to judicial determination as controversies arise. Federal Trade Comm'n v. Raladam
Co., 283 U. S. 643, 648, 283 U. S. 649; Federal Trade Comm'n v. Keppel & Bro., 291 U. S. 304, 310-312. What are

Page 295 U. S. 533

"unfair methods of competition" are thus to be determined in particular instances, upon evidence, in the light of
particular competitive conditions and of what is found to be a specific and substantial public interest. Federal Trade
Comm'n v. Beech-Nut Packing Co., 257 U. S. 441, 453; Federal Trade Comm'n v. Klesner, 280 U. S. 19, 27, 280 U.
S. 28; Federal Trade Comm'n v. Raladam Co., supra; Federal Trade Comm'n v. Keppel & Bro., supra; Federal
Trade Comm'n v. Algoma Lumber Co., 291 U. S. 67, 73. To make this possible, Congress set up a special procedure.
A Commission, a quasi-judicial body, was created. Provision was made formal complaint, for notice and hearing,
for appropriate findings of fact supported by adequate evidence, and for judicial review to give assurance that the
action of the Commission is taken within its statutory authority. Federal Trade Comm'n v. Raladam Co., supra;
Federal Trade Comm'n v. Klesner, supra. [Footnote 12]

In providing for codes, the National Industrial Recovery Act dispenses with this administrative procedure and with
any administrative procedure of an analogous character. But the difference been the code plan of the Recovery Act
and the scheme of the Federal Trade Commission Act lies not only in procedure, but in subject

Page 295 U. S. 534

matter. We cannot regard the "fair competition" of the codes as antithetical to the "unfair methods of competition" of
the Federal Trade Commission Act. The "fair competition" of the codes has a much broader range, and a new
significance. The Recovery Act provides that it shall not be construed to impair the powers of the Federal Trade
Commission, but, when a code is approved, its provisions are to be the "standards of fair competition" for the trade
or industry concerned, and any violation of such standards in any transaction in or affecting interstate or foreign
commerce is to be deemed "an unfair method of competition" within the meaning of the Federal Trade Commission
Act. § 3(b).

For a statement of the authorized objectives and content of the "codes of fair competition," we are referred
repeatedly to the "Declaration of Policy" in section one of Title I of the Recovery Act. Thus, the approval of a code
by the President is conditioned on his finding that it "will tend to effectuate the policy of this title." § 3(a). The
President is authorized to impose such conditions

"for the protection of consumers, competitors, employees, and others, and in furtherance of the public interest, and
may provide such exceptions to and exemptions from the provisions of such code as the President in his discretion
deems necessary to effectuate the policy herein declared."

Id. The "policy herein declared" is manifestly that set forth in section one. That declaration embraces a broad range
of objectives. Among them we find the elimination of "unfair competitive practices." But even if this clause were to
be taken to relate to practices which fall under the ban of existing law, either common law or statute, it is still only
one of the authorized aims described in section one. It is there declared to be "the policy of Congress" --

"to remove obstructions to the free flow of interstate and foreign commerce which tend to diminish the amount

Page 295 U. S. 535

 31

thereof, and to provide for the general welfare by promoting the organization of industry for the purpose of
cooperative action among trade groups, to induce and maintain united action of labor and management under
adequate governmental sanctions and supervision, to eliminate unfair competitive practices, to promote the fullest
possible utilization of the present productive capacity of industries, to avoid undue restriction of production (except
as may be temporarily required), to increase the consumption of industrial and agricultural products by increasing
purchasing power, to reduce and relieve unemployment, to improve standards of labor, and otherwise to rehabilitate
industry and to conserve natural resources. [Footnote 13]"

Under § 3, whatever "may tend to effectuate" these general purposes may be included in the "codes of fair
competition." We think the conclusion is inescapable that the authority sought to be conferred by § 3 was not merely
to deal with "unfair competitive practices " which offend against existing law, and could be the subject of judicial
condemnation without further legislation, or to create administrative machinery for the application of established
principles of law to particular instances of violation. Rather, the purpose is clearly disclosed to authorize new and
controlling prohibitions through codes of laws which would embrace what the formulators would propose, and what
the President would approve, or prescribe, as wise and beneficient measures for the government of trades and
industries in order to bring about their rehabilitation, correction and development, according to the general
declaration of policy in section one. Codes of laws of this sort are styled "codes of fair competition."

We find no real controversy upon this point, and we must determine the validity of the Code in question in this
aspect. As the Government candidly says in its

Page 295 U. S. 536

brief:

"The words 'policy of this title' clearly refer to the 'policy' which Congress declared in the section entitled
'Declaration of Policy' -- § 1. All of the policies there set forth point toward a single goal -- the rehabilitation of
industry and the industrial recovery which unquestionably was the major policy of Congress in adopting the
National Industrial Recovery Act."

And that this is the controlling purpose of the Code now before us appears both from its repeated declarations to that
effect and from the scope of its requirements. It will be observed that its provisions as to the hours and wages of
employees and its "general labor provisions" were placed in separate articles, and these were not included in the
article on "trade practice provisions" declaring what should be deemed to constitute "unfair methods of
competition." The Secretary of Agriculture thus stated the objectives of the Live Poultry Code in his report to the
President, which was recited in the executive order of approval:

"That said code will tend to effectuate the declared policy of title I of the National Industrial Recovery Act as set
forth in section 1 of said act in that the terms and provisions of such code tend to: (a) remove obstructions to the free
flow of interstate and foreign commerce which tend to diminish the amount thereof; (b) to provide for the general
welfare by promoting the organization of industry for the purpose of cooperative action among trade groups; (c) to
eliminate unfair competitive practices; (d) to promote the fullest possible utilization of the present productive
capacity of industries; (e) to avoid undue restriction of production (except a may be temporarily required); (f) to
increase the consumption of industrial and agricultural products by increasing purchasing power, and (g) otherwise
to rehabilitate industry, and to conserve natural resources. "

Page 295 U. S. 537

The Government urges that the codes will

"consist of rules of competition deemed fair for each industry by representative members of that industry -- by the
persons most vitally concerned and most familiar with its problems."

Instances are cited in which Congress has availed itself of such assistance; as, e.g., in the exercise of its authority
over the public domain with respect to the recognition of local customs or rules of miners as to mining claims,
[Footnote 14] or, in matters of a more or less technical nature, as in designating the standard height of drawbar.
[Footnote 15] But would it be seriously contended that Congress could delegate its legislative authority to trade or
 32

industrial associations or groups so as to empower them to enact the laws they deem to be wise and beneficent for
the rehabilitation and expansion of their trade or industries? Could trade or industrial associations or groups be
constituted legislative bodies for that purpose because such associations or groups are familiar with the problems of
their enterprises? And, could an effort of that sort be made valid by such a preface of generalities as to permissible
aims as we find in section 1 of title I? The answer is obvious. Such a delegation of legislative power is unknown to
our law, and is utterly consistent with the constitutional prerogatives and duties of Congress.

The question, then, turns upon the authority which § 3 of the Recovery Act vests in the President to approve or
prescribe. If the codes have standing as penal statutes, this must be due to the effect of the executive action. But
Congress cannot delegate legislative power to the President to exercise an unfettered discretion to make

Page 295 U. S. 538

whatever laws he thinks may be needed or advisable for the rehabilitation and expansion of trade or industry. See
Panama Refining Co. v. Ryan, supra, and cases there reviewed.

Accordingly, we turn to the Recovery Act to ascertain what limits have been set to the exercise of the President's
discretion. First, the President, as a condition of approval, is required to find that the trade or industrial associations
or groups which propose a code, "impose no inequitable restrictions on admission to membership," and are "truly
representative." That condition, however, relates only to the status of the initiators of the new laws, and not to the
permissible scope of such laws. Second, the President is required to find that the code is not "designed to promote
monopolies or to eliminate or oppress small enterprises, and will not operate to discriminate against them." And to
this is added a proviso that the code "shall not permit monopolies or monopolistic practices." But these restrictions
leave virtually untouched the field of policy envisaged by section one, and, in that wide field of legislative
possibilities, the proponents of a code, refraining from monopolistic designs, may roam at will, and the President
may approve or disapprove their proposals as he may see fit. That is the precise effect of the further finding that the
President is to make -- that the code " will tend to effectuate the policy of this title." While this is called a finding, it
is really but a statement of an opinion as to the general effect upon the promotion of trade or industry of a scheme of
laws. These are the only findings which Congress has made essential in order to put into operation a legislative code
having the aims described in the "Declaration of Policy."

Nor is the breadth of the President's discretion left to the necessary implication of this limited requirement as to his
findings. As already noted, the President, in approving a code, may impose his own conditions, adding to

Page 295 U. S. 539

or taking from what is proposed as, "in his discretion," he thinks necessary "to effectuate the policy" declared by the
Act. Of course, he has no less liberty when he prescribes a code on his own motion or on complaint, and he is free to
prescribe one if a code has not been approved. The Act provides for the creation by the President of administrative
agencies to assist him, but the action or reports of such agencies, or of his other assistants -- their recommendations
and findings in relation to the making of codes -- have no sanction beyond the will of the President, who may accept,
modify, or reject them as he pleases. Such recommendations or findings in no way limit the authority which § 3
undertakes to vest in the President with no other conditions than those there specified. And this authority relates to a
host of different trades and industries, thus extending the President's discretion to all the varieties of laws which he
my deem to be beneficial in dealing with the vast array of commercial and industrial activities throughout the
country.

Such a sweeping delegation of legislative power finds no support in the decisions upon which the Government
especially relies. By the Interstate Commerce Act, Congress has itself provided a code af laws regulating the
activities of the common carriers subject to the Act in order to assure the performance of their services upon just and
reasonable terms, with adequate facilities and without unjust discrimination. Congress, from time to time, has
elaborated its requirements as needs have been disclosed. To facilitate the application of the standards prescribed by
the Act, Congress has provided an expert body. That administrative agency, in dealing with particular cases, is
required to act upon notice and hearing, and its orders must be supported by findings of fact which, in turn, are
sustained by evidence. Interstate Commerce Comm'n v. Louisville & Nashville R. Co., 227 U. S. 88; Florida v.
United States, 282 U. S. 194; United States
 33

Page 295 U. S. 540

v. Baltimore & Ohio R. Co., 293 U. S. 454. When the Commission is authorized to issue, for the construction,
extension or abandonment of lines, a certificate of "public convenience and necessity," or to permit the acquisition
by one carrier of the control of another, if that is found to be "in the public interest," we have pointed out that these
provisions are not left without standards to guide determination. The authority conferred has direct relation to the
standards prescribed for the service of common carriers, and can be exercised only upon findings, based upon
evidence, with respect to particular conditions of transportation. New York Central Securities Co. v. United States,
287 U. S. 12, 24, 298 U. S. 25; Texas & Pacific Railway Co. v. Gulf, Colorado & Santa Fe Ry. Co., 270 U. S. 266,
273; Chesapeake & Ohio Ry. Co. v. United States, 283 U. S. 35, 42.

Similarly, we have held that the Radio Act of 1927 [Footnote 16] established standards to govern radio
communications, and, in view of the limited number of available broadcasting frequencies, Congress authorized
allocation and licenses. The Federal Radio Commission was created as the licensing authority in order to secure a
reasonable equality of opportunity in radio transmission and reception. The authority of the Commission to grant
licenses "as public convenience, interest or necessity requires" was limited by the nature of radio communications
and by the scope, character, and quality of the services to be rendered and the relative advantages to be derived
through distribution of facilities. These standards established by Congress were to be enforced upon hearing, and
evidence, by an administrative body acting under statutory restrictions adapted to the particular activity. Federal
Radio Comm'n v. Nelson Brothers Co., 289 U. S. 266.

Page 295 U. S. 541

In Hampton & Co. v. United States, 276 U. S. 394, the question related to the "flexible tariff provision" of the Tariff
Act of 1922. [Footnote 17] We held that Congress had described its plan

"to secure by law the imposition of customs duties on articles of imported merchandise which should equal the
difference between the cost of producing in a foreign country the articles in question and laying them down for sale
in the United States, and the cost of producing and selling like or similar articles in the United States."

As the differences cost might vary from time to time, provision was for the investigation and determination of these
differences by the executive branch, so as to make "the adjustments necessary to conform the duties to the standard
underlying that policy and plan." Id. p P. 404, 276 U. S. 405. The Court found the same principle to be applicable in
fixing customs duties as that which permitted Congress to exercise its ratemaking power in interstate commerce, "by
declaring the rule which shall prevail in the legislative fixing of rates" and then remitting "the fixing of such rates"
in accordance with its provisions "to a ratemaking body." Id., P. 409. The Court fully recognized the limitations
upon the delegation of legislative power. Id. p P. 408-411.

To summarize and conclude upon this point: Section 3 of the Recovery Act is without precedent. It supplies no
standards for any trade, industry or activity. It does not undertake to prescribe rules of conduct to be applied to
particular states of fact determined by appropriate administrative procedure. Instead of prescribing rules of conduct,
it authorizes the making of codes to prescribe them. For that legislative undertaking, § 3 sets up no standards, aside
from the statement of the general aims of rehabilitation, correction and expansion described in section one. In view
of the scope of that broad declaration, and of the

Page 295 U. S. 542

nature of the few restrictions that are imposed, the discretion of the President in approving or prescribing codes, and
thus enacting laws for the government of trade and industry throughout the country, is virtually unfettered. We think
that the code-making authority this conferred is an unconstitutional delegation of legislative power.

Third. The question of the application of the provisions of the Live Poultry Code to intrastate transactions. Although
the validity of the codes (apart from the question of delegation) rests upon the commerce clause of the Constitution,
§ 3(a) is not, in terms, limited to interstate and foreign commerce. From the generality of its terms, and from the
argument of the Government at the bar, it would appear that § 3(a) was designed to authorize codes without that
limitation. But, under § 3(f), penalties are confined to violations of a code provision "in any transaction in or
affecting interstate or foreign commerce." This aspect of the case presents the question whether the particular
 34

provisions of the Live Poultry Code, which the defendants were convicted for violating and for having conspired to
violate, were within the regulating power of Congress.

These provisions relate to the hours and wages of those employed by defendants in their slaughterhouses in
Brooklyn, and to the sales there made to retail dealers and butchers.

(1) Were these transactions "in" interstate commerce? Much is made of the fact that almost all the poultry coming to
New York is sent there from other States. But the code provisions, as here applied, do not concern the transportation
of the poultry from other States to New York, or the transactions of the commission men or others to whom it is
consigned, or the sales made by such consignees to defendants. When defendants had made their purchases, whether
at the West Washington Market in New York City or at the railroad

Page 295 U. S. 543

terminals serving the City, or elsewhere, the poultry was trucked to their slaugterhouses in Brooklyn for local
disposition. The interstate transactions in relation to that poultry then ended. Defendants held the poultry at their
slaughterhouse markets for slaughter and local sale to retail dealers and butchers who, in turn, sold directly to
consumers. Neither the slaughtering nor the sales by defendants were transactions in interstate commerce. Brown v.
Houston, 114 U. S. 622, 632, 114 U. S. 633; Public Utilities Comm'n v. Landon, 249 U. S. 236, 245; Industrial
Association v. States, 268 U. S. 64, 78, 268 U. S. 79; Atlantic Coast Line v. Standard Oil Co., 275 U. S. 257, 267.

The undisputed facts thus afford no warrant for the argument that the poultry handled by defendants at their
slaughterhouse markets was in a "current" or "flow" of interstate commerce, and was thus subject to congressional
regulation. The mere fact that there may be a constant flow of commodities into a State does not mean that the flow
continues after the property has arrived, and has become commingled with the mass of property within the State, and
is there held solely for local disposition and use. So far as the poultry here in question is concerned, the flow in
interstate commerce had ceased. The poultry had come to a permanent rest within the State. It was not held, used, or
sold by defendants in relation to any further transactions in interstate commerce, and was not destined for
transportation to other States. Hence, decisions which deal with a stream of interstate commerce -- where goods
come to rest within a State temporarily and are later to go forward in interstate commerce -- and with the regulations
of transactions involved in that practical continuity of movement, are not applicable here. See Swift & Co. v. United
States, 196 U. S. 375, 387, 388 [argument of counsel omitted in electronic version]; Lemke v. Farmers Grain Co.,
258 U. S. 50, 55; Stafford v. Wallace, 258 U. S. 495, 519; Chicago

Page 295 U. S. 544

Board of Trade v. Olsen, 262 U.S. l, 262 U. S. 35; Tagg Bros. & Moorhead v. United States, 280 U. S. 420, 439.

(2) Did the defendants' transactions directly "affect" interstate commerce, so as to be subject to federal regulation?
The power of Congress extends not only to the regulation of transactions which are part of interstate commerce, but
to the protection of that commerce from injury. It matters not that the injury may be due to the conduct of those
engaged in intrastate operations. Thus, Congress may protect the safety of those employed in interstate
transportation "no matter what may be the source of the dangers which threaten it." Southern Ry. Co. v. United
States, 222 U. S. 20, 27. We said in Second Employers' Liability Cases, 223 U. S. 1, 51, that it is the " effect upon
interstate commerce," not "the source of the injury," which is "the criterion of congressional power." We have held
that, in dealing with common carriers engaged in both interstate and intrastate commerce, the dominant authority of
Congress necessarily embraces the right to control their intrastate operations in all matters having such a close and
substantial relation to interstate traffic that the control is essential or appropriate to secure the freedom of that traffic
from interference or unjust discrimination and to promote the efficiency of the interstate service. The Shreveport
Case, 234 U. S. 342, 351, 234 U. S. 352; Wisconsin Railroad Comm'n v. Chicago, B. & Q. R. Co., 257 U. S. 563,
588. And combinations and conspiracies to restrain interstate commerce, or to monopolize any part of it, are
nonetheless within the reach of the Anti-Trust Act because the conspirators seek to attain their end by means of
intrastate activities. Coronado Coal Co. v. United Mine Workers, 268 U. S. 295, 310; Bedford Cut Stone Co. v.
Stone Cutters Assn., 274 U. S. 37, 46.

We recently had occasion, in Local 677 v. United States, 291 U. S. 293, to apply this principle in connection with
 35

Page 295 U. S. 545

the live poultry industry. That was a suit to enjoin a conspiracy to restrain and monopolize interstate commerce in
violation of the Anti-Trust Act. It was shown that marketmen, teamsters and slaughterers (shochtim) had conspired
to burden the free movement of live poultry into the metropolitan area in and about New York City. Marketmen had
organized an association, had allocated retailers among themselves, and had agreed to increase prices. To
accomplish their objects, large amounts of money were raised by levies upon poultry sold, men were hired to
obstruct the business dealers who resisted, wholesalers and retailers were spied upon, and, by violence and other
forms of intimidation, were prevented from freely purchasing live poultry. Teamsters refused to handle poultry for
recalcitrant marketmen, and members of the shochtim union refused to slaughter. In view of the proof of that
conspiracy, we said that it was unnecessary to decide when interstate commerce ended and when intrastate
commerce began. We found that the proved interference by the conspirators "with the unloading, the transportation,
the sales by marketmen to retailers, the prices charged, and the amount of profits exacted" operated "substantially
and directly to restrain and burden the untrammeled shipment and movement of the poultry" while unquestionably it
was in interstate commerce. The intrastate acts of the conspirators were included in the injunction because that was
found to be necessary for the protection of interstate commerce against the attempted and illegal restraint. Id. p P.
297, 291 U. S. 299, 291 U. S. 300.

The instant case is not of that sort. This is not a prosecution for a conspiracy to restrain or monopolize interstate
commerce in violation of the Anti-Trust Act. Defendants have been convicted not upon direct charges of injury to
interstate commerce or of interference with persons engaged in that commerce, but of violations of certain
provisions of the Live Poultry Code and of conspiracy

Page 295 U. S. 546

to commit these violations. Interstate commerce is brought in only upon the charge that violations of these
provisions -- as to hours and wages of employees and local sales - "affected" interstate commerce.

In determining how far the federal government may go in controlling intrastate transactions upon the ground that
they "affect" interstate commerce, there is a necessary and well established distinction between direct and indirect
effects. The precise line can be drawn only as individual cases arise, but the distinction is clear in principle. Direct
effects are illustrated by the railroad cases we have cited, as, e.g., the effect of failure to use prescribed safety
appliances on railroads which are the highways of both interstate and intrastate commerce, injury to an employee
engaged in interstate transportation by the negligence of an employee engaged in an intrastate movement, the fixing
of rates for intrastate transportation which unjustly discriminate against interstate commerce. But where the effect of
intrastate transactions upon interstate commerce is merely indirect, such transactions remain within the domain of
state power. If the commerce clause were construed to reach all enterprise and transactions which could be said to
have an indirect effect upon interstate commerce, the federal authority would embrace practically all the activities of
the people, and the authority of the State over its domestic concerns would exist only by sufferance of the federal
government. Indeed, on such a theory, even the development of the State's commercial facilities would be subject to
federal control. As we said in the Minnesota Rate Cases, 230 U. S. 352, 410:

"In the intimacy of commercial relations, much that is done in the superintendence of local matters may have an
indirect bearing upon interstate commerce. The development of local resources and the extension of local facilities
may have a very important effect upon communities less favored, and, to an appreciable degree,

Page 295 U. S. 547

alter the course of trade. The freedom of local trade may stimulate interstate commerce, while restrictive measures
within the police power of the State enacted exclusively with respect to internal business, as distinguished from
interstate traffic, may, in their reflex or indirect influence, diminish the latter and reduce the volume of articles
transported into or out of the State."

See also Kidd v. Pearson, 128 U. S. 1, 21; Heisler v. Thomas Collier Co., 260 U. S. 245, 259, 260 U. S. 260.

The distinction between direct and indirect effects has been clearly recognized in the application of the Anti-Trust
Act. Where a combination or conspiracy is formed, with the intent to restrain interstate commerce or to monopolize
 36

any part of it, the violation of the statute is clear. Coronado Coal Co. v. United Mine Workers, 268 U. S. 295, 310.
But where that intent is absent, and the objectives are limited to intrastate activities, the fact that there may be an
indirect effect upon interstate commerce does not subject the parties to the federal statute, notwithstanding its broad
provisions. This principle has frequently been applied in litigation growing out of labor disputes. United Mine
Workers v. Coronado Coal Co., 259 U. S. 344, 410, 259 U. S. 411; United Leather Workers v. Herkert & Meisel
Trunk Co., 265 U. S. 457, 464-467; Industrial Association v. United States, 268 U. S. 64, 82; Levering & Garrigues
Co. v. Morrin, 289 U. S. 103, 107, 289 U. S. 108. In the case last cited, we quoted with approval the rule that had
been stated and applied in Industrial Association v. United States, supra, after review of the decisions, as follows:

"The alleged conspiracy and the acts here complained of spent their intended and direct force upon a local situation
-- for building is as essentially local as mining, manufacturing or growing crops -- and if, by a resulting diminution
of the commercial demand, interstate trade was curtailed either generally or in specific instances, that was a
fortuitous consequence so remote and indirect

Page 295 U. S. 548

as plainly to cause it to fall outside the reach of the Sherman Act."

While these decisions related to the application of the federal statute, and not to its constitutional validity, the
distinction between direct and indirect effects of intrastate transactions upon interstate commerce must be
recognized as a fundamental one, essential to the maintenance of our constitutional system. Otherwise, as we have
said, there would be virtually no limit to the federal power, and, for all practical purposes, we should have a
completely centralized government. We must consider the provisions here in question in the light of this distinction.

The question of chief importance relates to the provisions of the Code as to the hours and wages of those employed
in defendants' slaughterhouse markets. It is plain that these requirements are imposed in order to govern the details
of defendants' management of their local business. The persons employed in slaughtering and selling in local trade
are not employed in interstate commerce. Their hours and wages have no direct relation to interstate commerce. The
question of how many hours these employees should work and what they should be paid differs in no essential
respect from similar questions in other local businesses which handle commodities brought into a State and there
dealt in as a part of its internal commerce. This appears from an examination of the considerations urged by the
Government with respect to conditions in the poultry trade. Thus, the Government argues that hours and wages
affect prices; that slaughterhouse men sell at a small margin above operating costs; that labor represents 50 to 60
percent of these costs; that a slaughterhouse operator paying lower wages or reducing his cost by exacting long
hours of work translates his saving into lower prices; that this results in demands for a cheaper grade of goods, and
that the cutting

Page 295 U. S. 549

of prices brings about a demoralization of the price structure. Similar conditions may be adduced in relation to other
businesses. The argument of the Government proves too much. If the federal government may determine the wages
and hours of employees in the internal commerce of a State, because of their relation to cost and prices and their
indirect effect upon interstate commerce, it would seem that a similar control might be exerted over other elements
of cost also affecting prices, such as the number of employees, rents, advertising, methods of doing business, etc. All
the processes of production and distribution that enter into cost could likewise be controlled. If the cost of doing an
intrastate business is, in itself, the permitted object of federal control, the extent of the regulation of cost would be a
question of discretion, and not of power.

The Government also makes the point that efforts to enact state legislation establishing high labor standards have
been impeded by the belief that, unless similar action is taken generally, commerce will be diverted from the States
adopting such standards, and that this fear of diversion has led to demands for federal legislation on the subject of
wages and hours. The apparent implication is that the federal authority under the commerce clause should be
deemed to extend to the establishment of rules to govern wages and hours in intrastate trade and industry generally
throughout the country, thus overriding the authority of the States to deal with domestic problems arising from labor
conditions in their internal commerce.
 37

It is not the province of the Court to consider the economic advantages or disadvantage of such a centralized system.
It is sufficient to say that the Federal Constitution does not provide for it. Our growth and development have called
for wide use of the commerce power of the federal government in its control over the expanded activities of
interstate commerce, and in protecting that

Page 295 U. S. 550

commerce from burdens, interferences, and conspiracies to restrain and monopolize it. But the authority of the
federal government may not be pushed to such an extreme as to destroy the distinction, which the commerce clause
itself establishes, between commerce "among the several States" and the internal concerns of a State. The same
answer must be made to the contention that is based upon the serious economic situation which led to the passage of
the Recovery Act -- the fall in prices, the decline in wages and employment, and the curtailment of the market for
commodities. Stress is laid upon the great importance of maintaining wage distributions which would provide the
necessary stimulus in starting "the cumulative forces making for expanding commercial activity." Without in any
way disparaging this motive, it is enough to say that the recuperative efforts of the federal government must be made
in a manner consistent with the authority granted by the Constitution.

We are of the opinion that the attempt, through the provisions of the Code, to fix the hours and wages of employees
of defendants in their intrastate business was not a valid exercise of federal power.

The other violations for which defendants were convicted related to the making of local sales. Ten counts, for
violation of the provision as to "straight killing" were for permitting customers to make " selections of individual
chickens taken from particular coops and half coops." Whether or not this practice is good or bad for the local trade,
its effect, if any, upon interstate commerce was only indirect. The same may be said of violations of the Code by
intrastate transactions consisting of the sale "of an unfit chicken" and of sales which were not in accord with the
ordinances of the City of New York. The requirement of report as to prices and volumes of defendants' sales was
incident to the effort to control their intrastate business.

Page 295 U. S. 551

In view of these conclusions, we find it unnecessary to discuss other questions which have been raised as to the
validity of certain provisions of the Code under the due process clause of the Fifth Amendment.

On both the grounds we have discussed, the attempted delegation of legislative power, and the attempted regulation
of intrastate transaction which affect interstate commerce only indirectly, we hold he code provisions here in
question to be invalid and that the judgment of conviction must be reversed.

No. 864 -- reversed. No. 86 -- affirmed. . . .

Page 295 U. S. 551

MR. JUSTICE CARDOZO, concurring.

The delegated power of legislation which has found expression in this code is not canalized within banks that keep it
from overflowing. It is unconfined and vagrant, if I may borrow my own words in an earlier opinion. Panama
Refining Co. v. Ryan, 293 U. S. 388, 440.

This court has held that delegation may be unlawful, though the act to be performed is definite and single, if the
necessity, time and occasion of performance have been left in the end to the discretion of the delegate. Panama
Refining Co. v. Ryan, supra. I thought that ruling went too far. I pointed out in an opinion that there had been "no
grant to the Executive of any roving commission to inquire into evils and then, upon discovering them, do anything
he pleases." 293 U.S. at P. 435. Choice, though within limits, had been given him "as to the occasion, but none
whatever as to the means." Ibid. Here, in the case before us, is an attempted delegation not confined to any single act
nor to any class or group of acts identified or described by reference to a standard. Here, in effect, is a roving
commission to inquire into evils and, upon discovery, correct them.

Page 295 U. S. 552

 38

I have said that there is no standard, definite or even approximate, to which legislation must conform. Let me make
my meaning more precise. If codes of fair competition are codes eliminating "unfair" methods of competition
ascertained upon inquiry to prevail in one industry or another, there is no unlawful delegation of legislative
functions when the President is directed to inquire into such practices and denounce them when discovered. For
many years, a like power has been committed to the Federal Trade Commission with the approval of this court in a
long series of decisions. Cf. Federal Trade Comm'n v. Keppel & Bro., 291 U. S. 304, 312; Federal Trade Comm'n v.
Raladam Co., 283 U. S. 643, 648; Federal Trade Comm'n v. Gratz, 253 U. S. 421. Delegation in such circumstances
is born of the necessities of the occasion. The industries of the country are too many and diverse to make it possible
for Congress, in respect of matters such as these, to legislate directly with adequate appreciation of varying
conditions. Nor is the substance of the power changed because the President may act at the instance of trade or
industrial associations having special knowledge of the facts. Their function is strictly advisory; it is the imprimatur
of the President that begets the quality of law. Doty v. Love, ante P. 64. When the task that is set before one is that of
cleaning house, it is prudent, as well as usual, to take counsel of the dwellers. But there is another conception of
codes of fair competition, their significance and function, which leads to very different consequences, though it is
one that is struggling now for recognition and acceptance. By this other conception, a code is not to be restricted to
the elimination of business practices that would be characterized by general acceptation as oppressive or unfair. It is
to include whatever ordinances may be desirable or helpful for the wellbeing or prosperity of the industry

Page 295 U. S. 553

affected. In that view, the function of its adoption is not merely negative, but positive -- the planning of
improvements as well as the extirpation of abuses. What is fair, as thus conceived, is not something to be contrasted
with what is unfair or fraudulent or tricky. The extension becomes as wide as the field of industrial regulation. If that
conception shall prevail, anything that Congress may do within the limits of the commerce clause for the betterment
of business may be done by the President upon the recommendation of a trade association by calling it a code. This
is delegation running riot. No such plenitude of power is susceptible of transfer. The statute, however, aims at
nothing less, as one can learn both from its terms and from the administrative practice under it. Nothing less is
aimed at by the code now submitted to our scrutiny.

The code does not confine itself to the suppression of methods of competition that would be classified as unfair
according to accepted business standards or accepted norm of ethics. It sets up a comprehensive body of rules to
promote the welfare of the industry, if not the welfare of the nation, without reference to standards, ethical or
commercial, that could be known or predicted in advance of its adoption. One of the new rules, the source of ten
counts in the indictment, is aimed at an established practice, not unethical or oppressive, the practice of selective
buying. Many others could be instanced as open to the same objection if the sections of the code were to be
examined one by one. The process of dissection will not be traced in all its details. Enough at this time to state what
it reveals. Even if the statute itself had fixed the meaning of fair competition by way of contrast with practices that
are oppressive or unfair, the code outruns the bounds of the authority conferred. What is excessive is not sporadic or
superficial. It is deep-seated and pervasive.

Page 295 U. S. 554

The licit and illicit sections are so combined and welded as to be incapable of severance without destructive
mutilation.

But there is another objection, far-reaching and incurable, aside from any defect of unlawful delegation.

If this code had been adopted by Congress itself, and not by the President, on the advice of an industrial association,
it would even then be void unless authority to adopt it is included in the grant of power "to regulate commerce with
foreign nations a among the several states." United States Constitution, Art. I, § 8, Clause 3.

I find no authority in that grant for the regulation of wages and hours of labor in the intrastate transactions that make
up the defendants' business. As to this feature of the case, little can be added to the opinion of the court. There is a
view of causation that would obliterate the distinction between what is national and what is local in the activities of
commerce. Motion at the outer rim is communicated perceptibly, though minutely, to recording instruments at the
center. A society such as ours "is an elastic medium which transmits all tremors throughout its territory; the only
question is of their size." Per Learned Hand, J., in the court below. The law is not indifferent to considerations of
 39

degree. Activities local in their immediacy do not become interstate and national because of distant repercussions.
What is near and what is distant may at times be uncertain. Cf. Chicago Board of Trade v. Olsen, 262 U. S. 1. There
is no penumbra of uncertainty obscuring judgment here. To find immediacy or directness here is to find it almost
everywhere. If centripetal forces are to be isolated to the exclusion of the forces that oppose and counteract them,
there will be an end to our federal system.

To take from this code the provisions as to wages and the hours of labor is to destroy it altogether. If a trade or an
industry is so predominantly local as to be exempt

Page 295 U. S. 555

from regulation by the Congress in respect of matters such as these, there can be no "code" for it at all. This is clear
from the provision of § 7a of the Act, with its explicit disclosure of the statutory scheme. Wages and the hours of
labor are essential features of the plan, its very bone and sinew. There is no opportunity in such circumstances for
the severance of the infected parts in the hope of saving the remainder. A code collapses utterly with bone and sinew
gone.

I am authorized to State that MR. JUSTICE STONE joins in this opinion.

 40

Ashwander v. Tennessee Valley Authority, 297 U.S. 288 (1936)

Argued December 19, 20, 1935

Decided February 17, 1936

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT

Syllabus

Page 297 U. S. 315

MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.

On January 4, 1934, the Tennessee Valley Authority, an agency of the Federal Government, [Footnote 1] entered
into a contract with the Alabama Power Company providing (1) for the purchase by the Authority from the Power
Company of certain transmission lines, substations, and auxiliary properties for ,000,000, (2) for the purchase by the
Authority from the Power Company of certain real property for 0,000, (3) for an interchange of hydroelectric
energy, and in addition for the sale by the Authority to the Power Company of its "surplus power," on stated terms,
and (4) for mutual restrictions as to the areas to be served in the sale of power. The contract was amended and
supplemented in minor particulars on February 13 and May 24, 1934. [Footnote 2]

The Alabama Power Company is a corporation organized under the laws of Alabama, and is engaged in the
generation of electric energy and its distribution generally throughout that State, its lines reaching 66 counties. The
transmission lines to be purchased by the Authority extend from Wilson Dam, at the Muscle Shoals plant owned by
the United States on the Tennessee River in

Page 297 U. S. 316

northern Alabama, into seven counties in that State within a radius of about 50 miles. These lines serve a population
of approximately 190,000, including about 10,000 individual customers, or about one-tenth of the total number
served directly by the Power Company. The real property to be acquired by the Authority (apart from the
transmission lines above mentioned and related properties) is adjacent to the area known as the "Joe Wheeler dam
site," upon which the Authority is constructing the Wheeler Dam.

The contract of January 4, 1934, also provided for cooperation between the Alabama Power Company and the
Electric Home and Farm Authority, Inc., a subsidiary of the Tennessee Valley Authority, to promote the sale of
electrical appliances, and, to that end, the Power Company, on May 21, 1934, entered into an agency contract with
the Electric Home and Farm Authority, Inc. It is not necessary to detail or discuss the proceedings in relation to that
transaction, as it is understood that the latter corporation has been dissolved.

There was a further agreement on August 9, 1934, by which the Alabama Power Company gave an option to the
Tennessee Valley Authority to acquire urban distribution systems which had been retained by the Power Company
in municipalities within the area served by the transmission lines above mentioned. It appears that this option has not
been exercised, and that the agreement has been terminated.

Plaintiffs are holders of preferred stock of the Alabama Power Company. Conceiving the contract with the
Tennessee Valley Authority to be injurious to the corporate interests and also invalid, because beyond the
constitutional power of the Federal Government, they submitted their protest to the board of directors of the Power
Company and demanded that steps should be taken to have the contract annulled. The board refused, and the

Page 297 U. S. 317

Commonwealth & Southern Corporation, the holder of all the common stock of the Power Company, declined to
call a meeting of the stockholders to take action. As the protest was unavailing, plaintiffs brought this suit to have
the invalidity of the contract determined and its performance enjoined. Going beyond that particular challenge, and
setting forth the pronouncements, policies and programs of the Authority, plaintiffs sought a decree restraining these
 41

activities as repugnant to the Constitution, and also asked a general declaratory decree with respect to the rights of
the Authority in various relations.

The defendants, including the Authority and its directors, the Power Company and its mortgage trustee, and the
municipalities within the described area, filed answers, and the case was heard upon evidence. The District Court
made elaborate findings and entered a final decree annulling the contract of January 4, 1934, and enjoining the
transfer of the transmission lines and auxiliary properties. The court also enjoined the defendant municipalities from
making or performing any contracts with the Authority for the purchase of power and from accepting or expending
any funds received from the Authority or the Public Works Administration for the purpose of constructing a public
distribution system to distribute power which the Authority supplied. The court gave no consideration to plaintiffs'
request for a general declaratory decree.

The Authority, its directors, and the city of Florence appealed from the decree, and the case was severed as to the
other defendants. Plaintiffs took a cross-appeal.

The Circuit Court of Appeals limited its discussion to the precise issue with respect to the effect and validity of the
contract of January 4, 1934. The District Court had found that the electric energy required for the territory served by
the transmission lines to be purchased

Page 297 U. S. 318

under that contract is available at Wilson Dam without the necessity for any interconnection with any other dam or
power plant. The Circuit Court of Appeals accordingly considered the constitutional authority for the construction of
Wilson Dam and for the disposition of the electric energy there created. In the view that the Wilson Dam had been
constructed in the exercise of the war and commerce powers of the Congress and that the electric energy there
available was the property of the United States and subject to its disposition, the Circuit Court of Appeals decided
that the decree of the District Court was erroneous, and should be reversed. The court also held that plaintiffs should
take nothing by their cross-appeal. 78 F.2d 578. On plaintiffs' application, we granted writs of certiorari.

First. The right of plaintiffs to bring this suit. Plaintiffs sue in the right of the Alabama Power Company. They
sought unsuccessfully to have that right asserted by the Power Company itself, and, upon showing their demand and
its refusal, they complied with the applicable rule. [Footnote 3] While their stock holdings are small, they have a real
interest, and there is no question that the suit was brought in good faith. [Footnote 4] If otherwise entitled, they
should not be denied the relief which would be accorded to one who owned more shares.

Plaintiffs did not simply challenge the contract of January 4, 1934, as improvidently made -- as an unwise exercise
of the discretion vested in the board of directors. They challenged the contract both as injurious to the

Page 297 U. S. 319

interests of the corporation and as an illegal transaction -- violating the fundamental law. In seeking to prevent the
carrying out of the contract, the suit was directed not only against the Power Company, but against the Authority and
its directors upon the ground that the latter, under color of the statute, were acting beyond the powers which the
Congress could validly confer. In such a case, it is not necessary for stockholders -- when their corporation refuses
to take suitable measures for its protection -- to show that the managing board or trustees have acted with fraudulent
intent or under legal duress. To entitle the complainants to equitable relief in the absence of an adequate legal
remedy, it is enough for them to show the breach of trust or duty involved in the injurious and illegal action. Nor is it
necessary to show that the transaction was ultra vires of the corporation. The illegality may be found in the lack of
lawful authority on the part of those with whom the corporation is attempting to deal. Thus, the breach of duty may
consist in yielding, without appropriate resistance, to governmental demands which are without warrant of law or
are in violation of constitutional restrictions. The right of stockholders to seek equitable relief has been recognized
when the managing board or trustees of the corporation have refused to take legal measures to resist the collection of
taxes or other exactions alleged to be unconstitutional (Dodge v. Woolsey, 18 How. 331, 59 U. S. 339, 59 U. S. 340,
59 U. S. 345; Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429, 433, 157 U. S. 553, 157 U. S. 554; Brushaber v.
Union Pacific R. Co., 240 U. S. 1, 10); or because of the failure to assert the rights and franchises of the corporation
against an unwarranted interference through legislative or administrative action (Greenwood v. Freight Co., 105 U.
 42

S. 13, 15, 105 U. S. 16; Cotting v. Kansas City Stockyards Co., 183 U. S. 79, 114). The remedy has been accorded to
stockholders of public service corporations with respect to rates alleged to be confiscatory

Page 297 U. S. 320

(Smyth v. Ames, 169 U. S. 466, 469, 169 U. S. 517; Ex parte Young, 209 U. S. 123, 129, 209 U. S. 130, 209 U. S.
143). The fact that the directors, in the exercise of their judgment, either because they were disinclined to undertake
a burdensome litigation or for other reasons which they regarded as substantial, resolved to comply with the
legislative or administrative demands has not been deemed an adequate ground for denying to the stockholders an
opportunity to contest the validity of the governmental requirements to which the directors were submitting. See
Dodge v. Woolsey, supra, at p P. 340, 59 U. S. 345; Greenwood v. Freight Co., supra, at P. 15; Pollock v. Farmers'
Loan & Trust Co., supra, at p P. 433, 157 U. S. 553, 157 U. S. 554; Brushaber v. Union Pacific R. Co., supra, at P.
10.

In Smith v. Kansas City Title Co., 255 U. S. 180, a shareholder of the Title Company sought to enjoin the directors
from investing its funds in the bonds of Federal Land Banks and Joint Stock Land Banks upon the ground that the
Act of Congress authorizing the creation of these banks and the issue of bonds was unconstitutional, and hence that
the bonds were not legal securities in which the corporate funds could lawfully be invested. The proposed
investment was not large -- only ,000 in each of the classes of bonds described. Id. p P. 195, 255 U. S. 196. And it
appeared that the directors of the Title Company maintained that the Federal Farm Loan Act was constitutional, and
that the bonds were "valid and desirable investments." Id., P. 201. But neither the conceded fact as to the judgment
of the directors nor the small amount to be invested -- shown by the averments of the complaint -- availed to defeat
the jurisdiction of the court to decide the question as to the validity of the Act and of the bonds which it authorized.
The Court held that the validity of the Act was directly drawn in question, and that the shareholder was entitled to
maintain the suit. The Court said:

"The general allegations as to the interest of the

Page 297 U. S. 321

shareholder, and his right to have an injunction to prevent the purchase of the alleged unconstitutional securities by
misapplication of the funds of the corporation, give jurisdiction under the principles settled in Pollock v. Farmers'
Loan & Trust Co. and Brushaber v. Union Pacific R. Co., supra."

Id., p P. 201, 255 U. S. 202. The Court then proceeded to examine the constitutional question, and sustained the
legislation under attack. A similar result was reached in Brushaber v. Union Pacific R. Co., supra. A close
examination of these decisions leads inevitably to the conclusion that they should either be followed or be frankly
overruled. We think that they should be followed, and that the opportunity to resort to equity, in the absence of an
adequate legal remedy, in order to prevent illegal transactions by those in control of corporate properties should not
be curtailed because of reluctance to decide constitutional questions.

We find no distinctions which would justify us in refusing to entertain the present controversy. It is urged that
plaintiffs hold preferred shares, and that, for the present purpose, they are virtually in the position of bondholders.
The rights of bondholders, in case of injury to their interests through unconstitutional demands upon, or transactions
with, their corporate debtor are not before us. Compare Reagan v. Farmers' Loan & Trust Co., 154 U. S. 362, 367,
368. Plaintiffs are not creditors, but shareholders (with equal voting power share for share with the common
stockholders, according to the findings), and thus they have a proprietary interest in the corporate enterprise which is
subject to injury through breaches of trust or duty on the part of the directors who are not less the representatives of
the plaintiffs because their shares have certain preferences. See Ball v. Rutland R. Co., 93 Fed. 513, 514, 515. It may
be, as in this case, that the owner of all the common stock has participated in the transaction in question, and the
owners of preferred

Page 297 U. S. 322

stock may be the only persons having a proprietary interest in the corporation who are in a position to protect its
interests against what is asserted to be an illegal disposition of its property. [Footnote 5] A court of equity should not
shut its door against them.
 43

It is said that here, instead of parting with money, as in the case of illegal or unconstitutional taxes or exactions, the
Power Company is to receive a substantial consideration under the contract in suit. But the Power Company is to
part with transmission lines which supply a large area, and plaintiffs allege that the consideration is inadequate, and
that the transaction entails a disruption of services and a loss of business and franchises. If, as plaintiffs contend,
those purporting to act as a governmental agency had no constitutional authority to make the agreement, its
execution would leave the Power Company with doubtful remedy, either against the governmental agency, which
might not be able, or against the Government, which might not be willing, to respond to a demand for the restoration
of conditions as they now exist. In what circumstances and with what result such an effort at restoration might be
made is unpredictable. If, as was decided in Smith v. Kansas City Title Co., supra, stockholders had the right to sue
to test the validity of a proposed investment in the bonds of land banks, we can see no reason for denying to these
plaintiffs a similar resort to equity in order to challenge, on the ground of unconstitutionality, a contract involving
such a dislocation and misapplication of corporate property as are charged in the instant case.

The Government urges that the Power Company is estopped to question the validity of the Act creating the
Tennessee Valley Authority, and hence that the stockholders, suing in the right of the corporation, cannot

Page 297 U. S. 323

maintain this suit. It is said that the Power Company, in 1925, installed its own transformers and connections at
Wilson Dam, and has ever since purchased large quantities of electric energy there generated, and that the Power
Company continued its purchases after the passage of the Act of 1933 constituting the Authority. The principle is
invoked that one who accepts the benefit of a statute cannot be heard to question its constitutionality. Great Falls
Manufacturing Co. v. Attorney General, 124 U. S. 581; Wall v. Parrot Silver & Copper Co., 244 U. S. 407; St.
Louis Casting Co. v. Prendergast Construction Co., 260 U. S. 469. We think that the principle is not applicable here.
The prior purchase of power in the circumstances disclosed may have a bearing upon the question before us, but it is
by no means controlling. The contract in suit manifestly has a broader range, and we find nothing in the earlier
transactions which preclude the contention that this contract goes beyond the constitutional power of the Authority.
Reference is also made to a proceeding instituted by the Power Company to obtain the approval of the contract by
the Alabama Public Service Commission and to the delay in the bringing of this suit. It was brought on October 8,
1934, following plaintiffs' demand upon the board of directors in the preceding August. Estoppel in equity must rest
on substantial grounds of prejudice or change of position, not on technicalities. We see no reason for concluding that
the delay or the proceeding before the Commission caused any prejudice to either the Power Company or the
Authority, so far as the subject matter of the contract between them is concerned, or that there is any basis for the
claim of estoppel.

We think that plaintiffs have made a sufficient showing to entitle them to bring suit, and that a constitutional
question is properly presented and should be decided.

Page 297 U. S. 324

Second. The scope of the issue. We agree with the Circuit Court of Appeals that the question to be determined is
limited to the validity of the contract of January 4, 1934. The pronouncements, policies and program of the
Tennessee Valley Authority and its directors, their motives and desires, did not give rise to a justiciable controversy
save as they had fruition in action of a definite and concrete character constituting an actual or threatened
interference with the rights of the persons complaining. The judicial power does not extend to the determination of
abstract questions. Muskrat v. United States, 219 U. S. 346, 361; Liberty Warehouse Co. v. Grannis, 273 U. S. 70,
74; Willing v. Chicago Auditorium Assn., 277 U. S. 274, 289; Nashville, C. & St.L. Ry. Co. v. Wallace, 288 U. S.
249, 262, 288 U. S. 264. It was for this reason that the Court dismissed the bill of the State of New Jersey which
sought to obtain a judicial declaration that, in certain features, the Federal Water Power Act [Footnote 6] exceeded
the authority of the Congress and encroached upon that of the State. New Jersey v. Sargent, 269 U. S. 328. For the
same reason, the State of New York, in her suit against the State of Illinois, failed in her effort to obtain a decision
of abstract questions as to the possible effect of the diversion of water from Lake Michigan upon hypothetical water
power developments in the indefinite future. New York v. Illinois, 274 U. S. 488. At the last term, the Court held, in
dismissing the bill of the United States against the State of West Virginia, that general allegations that the State
challenged the claim of the United States that the rivers in question were navigable, and asserted a right superior to
that of the United States to license their use for power production, raised an issue "too vague and ill-defined to admit
 44

of judicial determination." United States v. West Virginia, 295 U. S. 463, 474. Claims based merely upon "assumed
potential invasions"

Page 297 U. S. 325

of rights are not enough to warrant judicial intervention. Arizona v. California, 283 U. S. 423, 462.

The Act of June 14, 1934, [Footnote 7] providing for declaratory judgments, does not attempt to change the essential
requisites for the exercise of judicial power. By its terms, it applies to "cases of actual controversy," a phrase which
must be taken to connote a controversy of a justiciable nature, thus excluding an advisory decree upon a hypothetical
state of facts. See Nashville, C. & St.L. Ry. Co. v. Wallace, supra. While plaintiffs, as stockholders, might insist that
the board of directors should take appropriate legal measures to extricate the corporation from particular transactions
and agreements alleged to be invalid, plaintiffs had no right to demand that the directors should start a litigation to
obtain a general declaration of the unconstitutionality of the Tennessee Valley Authority Act in all its bearings, or a
decision of abstract questions as to the right of the Authority and of the Alabama Power Company in possible
contingencies.

Examining the present record, we find no ground for a demand by plaintiffs except as it related to the contracts
between the Authority and the Alabama Power Company. And as the contract of May 21, 1934, with the Electric
Home and Farm Authority, Inc., and that of August 9, 1934, for an option to the Authority to acquire urban
distribution systems, are understood to be inoperative (ante, P. 316), the only remaining questions that plaintiffs are
entitled to raise concern the contract of January 4, 1934, providing for the purchase of transmission lines and the
disposition of power.

There is a further limitation upon our inquiry. As it appears that the transmission lines in question run from the
Wilson Dam, and that the electric energy generated at that dam is more than sufficient to supply all the requirements

Page 297 U. S. 326

of the contract, the questions that are properly before us relate to the constitutional authority for the construction of
the Wilson Dam and for the disposition, as provided in the contract, of the electric energy there generated.

Third. The constitutional authority for the construction of the Wilson Dam. The Congress may not, "under the
pretext of executing its powers, pass laws for the accomplishment of objects not entrusted to the government." Chief
Justice Marshall, in McCulloch v. Maryland, 4 Wheat. 316, 17 U. S. 423; Linder v. United States, 268 U. S. 5, 17.
The Government's argument recognizes this essential limitation. The Government's contention is that the Wilson
Dam was constructed, and the power plant connected with it was installed, in the exercise by the Congress of its war
and commerce powers, that is, for the purposes of national defense and the improvement of navigation.

Wilson Dam is described as a concrete monolith one hundred feet high and almost a mile long, containing two locks
for navigation and eight installed generators. Construction was begun in 1917, and completed in 1926. Authority for
its construction is found in § 124 of the National Defense Act of June 3, 1916. [Footnote 8] It authorized the
President to cause an investigation to be made in order to determine "the best, cheapest, and most available means
for the production of nitrates and other products for munitions of war"; to designate for the exclusive use of the
United States

"such site or sites upon any navigable or nonnavigable river or rivers or upon the public lands as in his opinion will
be necessary for carrying out the purposes of this Act"

and "to construct, maintain and operate" on any such site

"dams, locks, improvements to navigation, power houses, and other plants and equipment or other

Page 297 U. S. 327

 45

means than water power as in his judgment is the best and cheapest, necessary or convenient for the generation of
electrical or other power and for the production of nitrates or other products needed for munitions of war and useful
in the manufacture of fertilizers and other useful products."

The President was authorized to lease, or acquire by condemnation or otherwise, such lands as might be necessary,
and there was further provision that

"The products of such plants shall be used by the President for military and naval purposes to the extent that he may
deem necessary, and any surplus which he shall determine is not required shall be sold and disposed of by him under
such regulations as he may prescribe."

Id.

We may take judicial notice of the international situation at the time the Act of 1916 was passed, and it cannot be
successfully disputed that the Wilson Dam and its auxiliary plants, including the hydroelectric power plant, are and
were intended to be adapted to the purposes of national defense. [Footnote 9] While the District Court found that
there is no intention to use the nitrate plants or the hydroelectric units installed at Wilson Dam for the production

Page 297 U. S. 328

of war materials in time of peace,

"the maintenance of said properties in operating condition and the assurance of an abundant supply of electric
energy in the event of war, constitute national defense assets."

This finding has ample support.

The Act of 1916 also had in view "improvements to navigation." Commerce includes navigation. "All America
understands, and has uniformly understood," said Chief Justice Marshall in Gibbons v. Ogden, 9 Wheat. 1, 22 U. S.
190, "the word commerce,' to comprehend navigation." The power to regulate interstate commerce embraces the
power to keep the navigable rivers of the United States free from obstructions to navigation, and to remove such
obstructions when they exist. "For these purposes," said the Court in Gilman v. Philadelphia, 3 Wall. 713, 725,

"Congress possesses all the powers which existed in the States before the adoption of the national Constitution, and
which have always existed in the Parliament in England."

See also Philadelphia Company v. Stimson, 223 U. S. 605, 634.

The Tennessee River is a navigable stream, although there are obstructions at various points because of shoals, reefs
and rapids. The improvement of navigation on this river has been a matter of national concern for over a century.
Recommendation that provision be made for

Page 297 U. S. 329

navigation around Muscle Shoals was made by the Secretary of War, John C. Calhoun, in his report transmitted to
the Congress by President Monroe in 1824, [Footnote 10] and, from 1852, the Congress has repeatedly authorized
protects to develop navigation on that and other portions of the river, both by open channel improvements and by
canalization. [Footnote 11] The Wilson Dam project, adopted in 1918, gave a nine-foot slack water development, for
fifteen miles above Florence, over the Muscle Shoals rapids and, as the District Court found, "flooded out the then
existing canal and locks, which were inadequate." The District Court also found that a "high dam of this type was
the only feasible means of eliminating this most serious obstruction to navigation." By the Act of 1930, after a
protracted study by the Corps of Engineers of the United States Army, the Congress adopted a project for a
permanent improvement of the main stream "for a navigable depth of nine feet." [Footnote 12]

While, in its present condition, the Tennessee River is not adequately improved for commercial navigation, and
traffic is small, we are not at liberty to conclude either that the river is not susceptible of development as an
important waterway or that Congress has not undertaken
 46

Page 297 U. S. 330

that development, or that the construction of the Wilson Dam was not an appropriate mean to accomplish a
legitimate end.

The Wilson Dam and its power plant must be taken to have been constructed in the exercise of the constitutional
functions of the Federal Government.

Fourth. The constitutional authority to dispose of electric energy generated at the Wilson Dam. The Government
acquired full title to the dam site, with all riparian rights. The power of falling water was an inevitable incident of
the construction of the dam. That water power came into the exclusive control of the Federal Government. The
mechanical energy was convertible into electric energy, and the water power, the right to convert it into electric
energy, and the electric energy thus produced, constitute property belonging to the United States. See Green Bay
Canal Co. v. Patten Paper Co., 172 U. S. 58, 80; United States v. Chandler-Dunbar Co., 229 U. S. 53, 72, 229 U. S.
73; Utah, Power & Light Co. v. Pfost, 286 U. S. 165, 170.

Authority to dispose of property constitutionally acquired by the United States is expressly granted to the Congress
by § 3 of Article IV of the Constitution. This section provides:

"The Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory
or other Property belonging to the United States, and nothing in this Constitution shall be so construed as to
Prejudice any Claims of the United States, or of any particular State."

To the extent that the power of disposition is thus expressly conferred, it is manifest that the Tenth Amendment is
not applicable. And the Ninth Amendment (which petitioners also invoke) in insuring the maintenance of the rights
retained by the people does not withdraw the rights which are expressly granted to the

Page 297 U. S. 331

Federal Government. The question is as to the scope of the grant, and whether there are inherent limitations which
render invalid the disposition of property with which we are now concerned.

The occasion for the grant was the obvious necessity of making provision for the government of the vast territory
acquired by the United States. The power to govern and to dispose of that territory was deemed to be indispensable
to the purposes of the cessions made by the States. And yet it was a matter of grave concern because of the fear that
"the sale and disposal" might become "a source of such immense revenue to the national government as to make it
independent of and formidable to the people." Story on the Constitution, §§ 1325, 1326. The grant was made in
broad terms, and the power of regulation and disposition was not confined to territory, but extended to "other
property belonging to the United States," so that the power may be applied, as Story says, "to the due regulation of
all other personal and real property rightfully belonging to the United States." And so, he adds, "it has been
constantly understood and acted upon." Id.

This power of disposal was early construed to embrace leases, thus enabling the Government to derive profit
through royalties. The question arose with respect to a government lease of lead mines on public lands, under the
Act of March 3, 1807. The contention was advanced that "disposal is not letting or leasing"; that Congress had no
power "to give or authorize leases" and "to obtain profits from the working of the mines." The Court overruled the
contention, saying:

"The disposal must be left to the discretion of Congress. And there can be no apprehensions of any encroachments
upon state rights, by the creation of a numerous tenantry within their borders, as has been so strenuously urged in the
argument."

United States v. Gratiot, 14 Pet. 526, 533 [argument of counsel -- omitted], 39 U. S. 538. The policy, early

Page 297 U. S. 332

 47

adopted and steadily pursued, of segregating mineral lands from other public lands and providing for leases pointed
to the recognition both of the full power of disposal and of the necessity of suitably adapting the methods of disposal
to different sorts of property. The policy received particular emphasis following the discovery of gold in California
in 1848. [Footnote 13] For example, an Act of 1866, dealing with grants to Nevada, declared that, "in all cases, lands
valuable for mines of gold, silver, quicksilver, or copper shall be reserved from sale." [Footnote 14] And Congress,
from the outset, adopted a similar practice in reserving salt springs. Morton v. Nebraska, 21 Wall. 660, 667
[argument of counsel -- omitted]; Montello Salt Co. v. Utah, 221 U. S. 452. It was in the light of this historic policy
that the Court held that the school grant to Utah by the Enabling Act of 1894 [Footnote 15] was not intended to
embrace land known to be valuable for coal. United States v. Sweet, 245 U. S. 563, 57. See also, as to the reservation
and leases of oil lands, Pan American Petroleum Co. v. United States, 273 U. S. 456, 487.

But when Congress thus reserved mineral lands for special disposal, can it be doubted that Congress could have
provided for mining directly by its own agents, instead of giving that right to lessees on the payment of royalties?
[Footnote 16] Upon what ground could it be said that the Government could not mine its own gold, silver, coal, lead,
or phosphates in the public domain, and dispose of them as property belonging to the United States? That it could
dispose

Page 297 U. S. 333

of its land, but not of what the land contained? It would seem to be clear that, under the same power of disposition
which enabled the Government to lease and obtain profit from sales by its lessees, it could mine and obtain profit
from its own sales.

The question is whether a more limited power of disposal should be applied to the water power, convertible into
electric energy, and to the electric energy thus produced at the Wilson Dam constructed by the Government in the
exercise of its constitutional functions. If so, it must be by reason either of (1) the nature of the particular property,
or (2) the character of the "surplus" disposed of, or (3) the manner of disposition.

(1) That the water power and the electric energy generated at the dam are susceptible of disposition as property
belonging to the United States is well established. In the case of Green Bay Canal Co. v. Patten Paper Co., supra,
the question was

"whether the water power, incidentally created by the erection and maintenance of the dam and canal for the purpose
of navigation in Fox River"

was

"subject to control and appropriation by the United States, owning and operating those public works, or by the State
of Wisconsin, within whose limits Fox River lies."

Id. p P. 68, 172 U. S. 69. It appeared that, under the authority of the Congress, the United States had acquired, by
purchase from a Canal Company, title to its improvement works, lands and water powers, on the Fox River, and that
the United States had consented to the retention by the Canal Company of the water powers with appurtenances. We
held that the

"substantial meaning of the transaction was that the United States granted to the Canal Company the right to
continue in the possession and enjoyment of the water powers and the lots appurtenant thereto, subject to the rights
and control of the United States as owning and operating the public works,"

and that the method by which the arrangement was

Page 297 U. S. 334

effected was

"as efficacious as if the entire property had been conveyed to the United States by one deed, and the reserved
properties had been reconveyed to the Canal Company by another."
 48

Id., P. 80. We thought it clear that the Canal Company was "possessed of whatever rights to the use of this incidental
water power that could be validly granted by the United States." Id., P. 69. And, in this view, it was decided that, so
far as the "water powers and appurtenant lots are regarded as property," the title of the Canal Company could not be
controverted, and that it was "equally plain that the mode and extent of the use and enjoyment of such property by
the Canal Company" fell within the sole control of the United States. See Kaukauna Walter Power Co. v. Green Bay
Canal Co., 142 U. S. 254; Green Bay Canal Co. v. Patten Paper Co., 173 U. S. 179.

In United States v. Chandler-Dunbar Co., 229 U. S. 53, the United States had condemned land in Michigan, lying
between the St. Marys River and the ship canal strip of the Government, in order to improve navigation. The
riparian owner, under revocable permits from the Secretary of War, had placed in the rapids "the necessary dams,
dykes and forebays for the purpose of controlling the current and using its power for commercial purposes." Id., P.
68. The Act of March 3, 1909, [Footnote 17] authorizing the improvement, had revoked the permit. We said that the
Government "had dominion over the water power of the rapids and falls," and could not be required to pay "any
hypothetical additional value to a riparian owner who had no right to appropriate the current to his own commercial
use." Id., P. 76. The Act of 1909 also authorized the Secretary of War to lease

"any excess of water power which results from the conservation of the flow of the river, and the works which the
Government may construct. "

Page 297 U. S. 335

"If the primary purpose is legitimate," said the Court,

"we can see no sound objection to leasing any excess of power over the needs of the Government. The practice is
not unusual in respect to similar public works constructed by state governments."

Id., P. 73. Reference was made to the case of Kaukauna Water Power Co. v. Green Bay Canal Co., supra, where the
Court had observed in relation to a Wisconsin statute of 1848, which had reserved to the State the water power
created by the dam over the Fox River:

"As there is no need of the surplus running to waste, there was nothing objectionable in permitting the State to let
out the use of it to private parties, and thus reimburse itself for the expenses of the improvement."

In International Paper Co. v. United States, 282 U. S. 399, the Government made a wartime requisition of electrical
power, and was held bound to make compensation to a lessee who thereby had lost the use of the water to which he
was entitled. The Court brushed aside attempted "distinctions between the taking of power and the taking of water
rights," saying that the Government intended "to take and did take the use of all the water power," and had exercised
its power of eminent domain to that end. Id. p P. 407, 282 U. S. 408.

(2) The argument is stressed that, assuming that electric energy generated at the dam belongs to the United States,
the Congress has authority to dispose of this energy only to the extent that it is a surplus necessarily created in the
course of making munitions of war or operating the works for navigation purposes; that is, that the remainder of the
available energy must be lost or go to waste. We find nothing in the Constitution which imposes such a limitation. It
is not to be deduced from the mere fact that the electric energy is only potentially available until the generators are
operated. The Government has no less right to the energy thus available by letting the water course over its turbines
than it has

Page 297 U. S. 336

to use the appropriate processes to reduce to possession other property within its control, as, for example, oil which
it may recover from a pool beneath its lands, and which is reduced to possession by boring oil wells and otherwise
might escape its grasp. See Ohio Oil Co. v. Indiana, 177 U. S. 190, 208. And it would hardly be contended that,
when the Government reserves coal on its lands, it can mine the coal and dispose of it only for the purpose of
heating public buildings or for other governmental operations. Or, if the Government owns a silver mine, that it can
obtain the silver only for the purpose of storage or coinage. Or that, when the Government extracts the oil it has
reserved, it has no constitutional power to sell it. Our decisions recognize no such restriction. United States v.
Gratiot, 14 Pet. 526; Kansas v. Colorado, 206 U. S. 46, 88, 206 U. S. 89; Light v. United States, 220 U. S. 523, 536,
 49

220 U. S. 537; Ruddy v. Rossi, 248 U. S. 104, 106. The United States owns the coal, or the silver, or the lead, or the
oil it obtains from its lands, and it lies in the discretion of the Congress, acting in the public interest, to determine of
how much of the property it shall dispose. We think that the same principle is applicable to electric energy. The
argument pressed upon us leads to absurd consequences in the denial, despite the broad terms of the constitutional
provision, of a power of disposal which the public interest may imperatively require. Suppose, for example, that, in
the erection of a dam for the improvement of navigation, it became necessary to destroy a dam and power plant
which had previously been erected by a private corporation engaged in the generation and distribution of energy
which supplied the needs of neighboring communities and business enterprises. Would anyone say that, because the
United States had built its own dam and plant in the exercise of its constitutional functions, and had complete
ownership and dominion over both, no power could be supplied to the communities and enterprises dependent on it,
not because of

Page 297 U. S. 337

any unwillingness of the Congress to supply it, or of any overriding governmental need, but because there was no
constitutional authority to furnish the supply? Or that, with abundant power available which must otherwise be
wasted, the supply to the communities and enterprises whose very life may be at stake must be limited to the slender
amount of surplus unavoidably involved in the operation of the navigation works because the Constitution does not
permit any more energy to be generated and distributed? In the case of the Green Bay Canal Co., above cited, where
the government works supplanted those of the Canal Company, the Court found no difficulty in sustaining the
Government's authority to grant to the Canal Company the water powers which it had previously enjoyed, subject,
of course, to the dominant control of the Government. And in the case of United States v. Chandler-Dunbar Co.,
supra, the statutory provision, to which the Court referred, was

"that any excess of water in the St. Marys River at Sault Sainte Marie over and above the amount now or hereafter
required for the uses of navigation shall be leased for power purposes by the Secretary of War upon such terms and
conditions as shall be best calculated in his judgment to insure the development thereof."

It was to the leasing, under this provision, "of any excess of power over the needs of the Government" that the Court
saw no valid objection. Id., P. 73.

The decisions which petitioners cite give no support to their contention. Pollard v. Hagan, 3 How. 212, Shively v.
Bowlby, 152 U. S. 1, and Port of Seattle v. Oregon-Washington R. Co., 255 U. S. 56, dealt with the title of the States
to tidelands and the soil under navigable waters within their borders. See Borax Consolidated v. Los Angeles, 296 U.
S. 10, 15. Those cases did not concern the dominant authority of the Federal Government in the interest of
navigation to erect dams and avail itself of the incidental water power. We emphasized the dominant character of
that authority in the case of

Page 297 U. S. 338

the Green Bay Canal Co., supra, by this statement, at P. 80:

"At what points in the dam and canal the water for power may be withdrawn, and the quantity which can be treated
as surplus with due regard to navigation, must be determined by the authority which owns and controls that
navigation. In such matters, there can be no divided empire."

The case of Wisconsin v. Illinois, 278 U. S. 367, related to the diversion by the State of Illinois of water from Lake
Michigan through the drainage canal at Chicago, and the questions now before us with respect to the disposition of
surplus energy created at a dam erected by the Federal Government in the performance of its constitutional functions
were in no way involved.

(3) We come then to the question as to the validity of the method which has been adopted in disposing of the surplus
energy generated at the Wilson Dam. The constitutional provision is silent as to the method of disposing of property
belonging to the United States. That method, of course, must be an appropriate means of disposition according to the
nature of the property, it must be one adopted in the public interest, as distinguished from private or personal ends,
and we may assume that it must be consistent with the foundation principles of our dual system of government, and
must not be contrived to govern the concerns reserved to the States. See Kansas v. Colorado, supra. In this instance,
 50

the method of disposal embraces the sale of surplus energy by the Tennessee Valley Authority to the Alabama
Power Company, the interchange of energy between the Authority and the Power Company, and the purchase by the
Authority from the Power Company of certain transmission lines.

As to the mere sale of surplus energy, nothing need be added to what we have said as to the constitutional authority
to dispose. The Government could lease or sell and fix the terms. Sales of surplus energy to the Power Company by
the Authority continued a practice begun by the Government several years before. The contemplated

Page 297 U. S. 339

interchange of energy is a form of disposition, and presents no questions which are essentially different from those
that are pertinent to sales.

The transmission lines which the Authority undertakes to purchase from the Power Company lead from the Wilson
Dam to a large area within about fifty miles of the dam. These lines provide the means of distributing the electric
energy generated at the dam to a large population. They furnish a method of reaching a market. The alternative
method is to sell the surplus energy at the dam, and the market there appears to be limited to one purchaser, the
Alabama Power Company, and its affiliated interests. We know of no constitutional ground upon which the Federal
Government can be denied the right to seek a wider market. We suppose that, in the early days of mining in the
West, if the Government had undertaken to operate a silver mine on its domain, it could have acquired the mules or
horses and equipment to carry its silver to market. And the transmission lines for electric energy are but a facility for
conveying to market that particular sort of property, and the acquisition of these lines raises no different
constitutional question, unless in some way there is an invasion of the rights reserved to the State or to the people.
We find no basis for concluding that the limited undertaking with the Alabama Power Company amounts to such an
invasion. Certainly, the Alabama Power Company has no constitutional right to insist that it shall be the sole
purchaser of the energy generated at the Wilson Dam -- that the energy shall be sold to it or go to waste.

We limit our decision to the case before us as we have defined it. The argument is earnestly presented that the
Government, by virtue of its ownership of the dam and power plant, could not establish a steel mill and make and
sell steel products, or a factory to manufacture clothing or shoes for the public, and thus attempt to make its

Page 297 U. S. 340

ownership of energy, generated at its dam, a means of carrying on competitive commercial enterprises, and thus
drawing to the Federal Government the conduct and management of business having no relation to the purposes for
which the Federal Government was established. The picture is eloquently drawn, but we deem it to be irrelevant to
the issue here. The Government is not using the water power at the Wilson Dam to establish any industry or
business. It is not using the energy generated at the dam to manufacture commodities of any sort for the public. The
Government is disposing of the energy itself, which simply is the mechanical energy, incidental to falling water at
the dam, converted into the electric energy which is susceptible of transmission. The question here is simply as to
the acquisition of the transmission lines as a facility for the disposal of that energy. And the Government rightly
conceded at the bar, in substance, that it was without constitutional authority to acquire or dispose of such energy
except as it comes into being in the operation of works constructed in the exercise of some power delegated to the
United States. As we have said, these transmission lines lead directly from the dam, which has been lawfully
constructed, and the question of the constitutional right of the Government to acquire or operate local or urban
distribution systems is not involved. We express no opinion as to the validity of such an effort, as to the status of any
other dam or power development in the Tennessee Valley, whether connected with or apart from the Wilson Dam,
or as to the validity of the Tennessee Valley Authority Act or of the claims made in the pronouncements and
program of the Authority apart from the questions we have discussed in relation to the particular provisions of the
contract of January 4, 1934, affecting the Alabama Power Company.

The decree of the Circuit Court of Appeals is

Affirmed. . . .
 51

West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937)

Argued December 16, 17, 1936

Decided March 29, 1937

APPEAL FROM THE SUPREME COURT OF WASHINGTON

Syllabus

Page 300 U. S. 380

This was an appeal from a judgment for money directed by the Supreme Court of Washington, reversing the trial
court, in an action by a chambermaid against a hotel company to recover the difference between the amount of
wages paid or tendered to her as per contract and a larger amount computed on the minimum wage fixed by a state
board or commission.

Page 300 U. S. 386

MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.

This case presents the question of the constitutional validity of the minimum wage law of the State of Washington.

The Act, entitled "Minimum Wages for Women," authorizes the fixing of minimum wages for women and minors.
Laws of 1913 (Washington) chap. 174; Remington's Rev.Stat. (1932), § 7623 et seq. It provides:

"SECTION 1. The welfare of the State of Washington demands that women and minors be protected from
conditions of labor which have a pernicious effect on their health and morals. The State of Washington, therefore,
exercising herein its police and sovereign power declares that inadequate wages and unsanitary conditions of labor
exert such pernicious effect."

"SEC. 2. It shall be unlawful to employ women or minors in any industry or occupation within the State of
Washington under conditions of labor detrimental to their health or morals, and it shall be unlawful to employ

Page 300 U. S. 387

women workers in any industry within the State of Washington at wages which are not adequate for their
maintenance."

"SEC. 3. There is hereby created a commission to be known as the 'Industrial Welfare Commission' for the State of
Washington, to establish such standards of wages and conditions of labor for women and minors employed within
the State of Washington as shall be held hereunder to be reasonable and not detrimental to health and morals, and
which shall be sufficient for the decent maintenance of women."

Further provisions required the Commission to ascertain the wages and conditions of labor of women and minors
within the State. Public hearings were to be held. If, after investigation, the Commission found that, in any
occupation, trade or industry, the wages paid to women were "inadequate to supply them necessary cost of living
and to maintain the workers in health," the Commission was empowered to call a conference of representatives of
employers and employees together with disinterested persons representing the public. The conference was to
recommend to the Commission, on its request, an estimate of a minimum wage adequate for the purpose above
stated, and, on the approval of such a recommendation, it became the duty of the Commission to issue an obligatory
order fixing minimum wages. Any such order might be reopened, and the question reconsidered with the aid of the
former conference or a new one. Special licenses were authorized for the employment of women who were
"physically defective or crippled by age or otherwise," and also for apprentices, at less than the prescribed minimum
wage.

By a later Act, the Industrial Welfare Commission was abolished, and its duties were assigned to the Industrial
Welfare Committee, consisting of the Director of Labor and Industries, the Supervisor of Industrial Insurance,
 52

Page 300 U. S. 388

the Supervisor of Industrial Relations, the Industrial Statistician, and the Supervisor of Women in Industry. Laws of
1921 (Washington) c. 7; Remington's Rev.Stat. (1932), §§ 10840, 10893.

The appellant conducts a hotel. The appellee, Elsie Parrish, was employed as a chambermaid and (with her husband)
brought this suit to recover the difference between the wages paid her and the minimum wage fixed pursuant to the
state law. The minimum wage was .50 per week of 48 hours. The appellant challenged the act as repugnant to the
due process clause of the Fourteenth Amendment of the Constitution of the United States. The Supreme Court of the
State, reversing the trial court, sustained the statute and directed judgment for the plaintiffs. Parrish v. West Coast
Hotel Co., 185 Wash. 581, 55 P.2d 1083. The case is here on appeal.

The appellant relies upon the decision of this Court in Adkins v. Children's Hospital, 261 U. S. 525, which held
invalid the District of Columbia Minimum Wage Act, which was attacked under the due process clause of the Fifth
Amendment. On the argument at bar, counsel for the appellees attempted to distinguish the Adkins case upon the
ground that the appellee was employed in a hotel, and that the business of an innkeeper was affected with a public
interest. That effort at distinction is obviously futile, as it appears that, in one of the cases ruled by the Adkins
opinion, the employee was a woman employed as an elevator operator in a hotel. Adkins v. Lyons, 261 U. S. 525, at
P. 542.

The recent case of Morehead v. New York ex rel. Tipaldo, 298 U. S. 587, came here on certiorari to the New York
court, which had held the New York minimum wage act for women to be invalid. A minority of this Court thought
that the New York statute was distinguishable in a material feature from that involved in the Adkins case, and, that
for that and other reasons, the New

Page 300 U. S. 389

York statute should be sustained. But the Court of Appeals of New York had said that it found no material
difference between the two statutes, and this Court held that the "meaning of the statute" as fixed by the decision of
the state court "must be accepted here as if the meaning had been specifically expressed in the enactment." Id., P.
609. That view led the affirmance by this Court of the judgment in the Morehead case, as the Court considered that
the only question before it was whether the Adkins case was distinguishable, and that reconsideration of that
decision had not been sought. Upon that point, the Court said:

"The petition for the writ sought review upon the ground that this case [Morehead] is distinguishable from that one
[Adkins]. No application has been made for reconsideration of the constitutional question there decided. The validity
of the principles upon which that decision rests is not challenged. This court confines itself to the ground upon
which the writ was asked or granted. . . . Here, the review granted was no broader than that sought by the
petitioner. . . . He is not entitled, and does not ask, to be heard upon the question whether the Adkins case should be
overruled. He maintains that it may be distinguished on the ground that the statutes are vitally dissimilar."

Id. p P. 604, 298 U. S. 605.

We think that the question which was not deemed to be open in the Morehead case is open and is necessarily
presented here. The Supreme Court of Washington has upheld the minimum wage statute of that State. It has
decided that the statute is a reasonable exercise of the police power of the State. In reaching that conclusion, the
state court has invoked principles long established by this Court in the application of the Fourteenth Amendment.
The state court has refused to regard the decision in the Adkins case as determinative, and has pointed to our
decisions both before and since that case as justifying its position. We are of the opinion that this ruling of

Page 300 U. S. 390

the state court demands on our part a reexamination of the Adkins case. The importance of the question, in which
many States having similar laws are concerned, the close division by which the decision in the Adkins case was
reached, and the economic conditions which have supervened, and in the light of which the reasonableness of the
exercise of the protective power of the State must be considered, make it not only appropriate, but we think
imperative, that, in deciding the present case, the subject should receive fresh consideration.
 53

The history of the litigation of this question may be briefly stated. The minimum wage statute of Washington was
enacted over twenty-three years ago. Prior to the decision in the instant case, it had twice been held valid by the
Supreme Court of the State. Larsen v. Rice, 100 Wash. 642, 171 Pac. 1037; Spokane Hotel Co. v. Younger, 113
Wash. 359, 194 Pac. 595. The Washington statute is essentially the same as that enacted in Oregon in the same year.
Laws of 1913 (Oregon) chap. 62. The validity of the latter act was sustained by the Supreme Court of Oregon in
Stettler v. O'Hara, 69 Ore. 519, 139 Pac. 743, and Simpson v. O'Hara, 70 Ore. 261, 141 Pac. 158. These cases, after
reargument, were affirmed here by an equally divided court, in 1917. 243 U.S. 629. The law of Oregon thus
continued in effect. The District of Columbia Minimum Wage Law (40 Stat. 960) was enacted in 1918. The statute
was sustained by the Supreme Court of the District in the Adkins case. Upon appeal, the Court of Appeals of the
District first affirmed that ruling, but, on rehearing, reversed it, and the case came before this Court in 1923. The
judgment of the Court of Appeals holding the Act invalid was affirmed, but with Chief Justice Taft, Mr. Justice
Holmes and Mr. Justice Sanford dissenting, and Mr. Justice Brandeis taking no part. The dissenting opinions took
the ground that the decision was at variance with the

Page 300 U. S. 391

principles which this Court had frequently announced and applied. In 1925 and 1927, the similar minimum wage
statutes of Arizona and Arkansas were held invalid upon the authority of the Adkins case. The Justices who had
dissented in that case bowed to the ruling, and Mr. Justice Brandeis dissented. Murphy v. Sardell, 269 U.S. 530;
Donham v. West-Nelson Co., 273 U.S. 657. The question did not come before us again until the last term in the
Morehead case, as already noted. In that case, briefs supporting the New York statute were submitted by the States
of Ohio, Connecticut, Illinois, Massachusetts, New Hampshire, New Jersey and Rhode Island. 298 U.S. p. 604, note.
Throughout this entire period, the Washington statute now under consideration has been in force.

The principle which must control our decision is not in doubt. The constitutional provision invoked is the due
process clause of the Fourteenth Amendment, governing the States, as the due process clause invoked in the Adkins
case governed Congress. In each case, the violation alleged by those attacking minimum wage regulation for women
is deprivation of freedom of contract. What is this freedom? The Constitution does not speak of freedom of contract.
It speaks of liberty and prohibits the deprivation of liberty without due process of law. In prohibiting that
deprivation, the Constitution does not recognize an absolute and uncontrollable liberty. Liberty in each of its phases
has its history and connotation. But the liberty safeguarded is liberty in a social organization which requires the
protection of law against the evils which menace the health, safety, morals and welfare of the people. Liberty under
the Constitution is thus necessarily subject to the restraints of due process, and regulation which is reasonable in
relation to its subject and is adopted in the interests of the community is due process.

Page 300 U. S. 392

This essential limitation of liberty in general governs freedom of contract in particular. More than twenty-five years
ago, we set forth the applicable principle in these words, after referring to the cases where the liberty guaranteed by
the Fourteenth Amendment had been broadly described: [Footnote 1]

"But it was recognized in the cases cited, as in many others, that freedom of contract is a qualified, and not an
absolute, right. There is no absolute freedom to do as one wills or to contract as one chooses. The guaranty of liberty
does not withdraw from legislative supervision that wide department of activity which consists of the making of
contracts, or deny to government the power to provide restrictive safeguards. Liberty implies the absence of
arbitrary restraint, not immunity from reasonable regulations and prohibitions imposed in the interests of the
community."

Chicago, B. & Q. R. Co. v. McGuire, 219 U. S. 549, 567.

This power under the Constitution to restrict freedom of contract has had many illustrations. [Footnote 2] That it
may be exercised in the public interest with respect to contracts

Page 300 U. S. 393

between employer and employee is undeniable. Thus, statutes have been sustained limiting employment in
underground mines and smelters to eight hours a day (Holden v. Hardy, 169 U. S. 366); in requiring redemption in
 54

cash of store orders or other evidences of indebtedness issued in the payment of wages (Knoxville Iron Co. v.
Harbison, 183 U. S. 13); in forbidding the payment of seamen's wages in advance (Patterson v. Bark Eudora, 190
U. S. 169); in making it unlawful to contract to pay miners employed at quantity rates upon the basis of screened
coal instead of the weight of the coal as originally produced in the mine (McLean v. Arkansas, 211 U. S. 539); in
prohibiting contracts limiting liability for injuries to employees (Chicago, B. & Q. R. Co. v. McGuire, supra); in
limiting hours of work of employees in manufacturing establishments (Bunting v. Oregon, 243 U. S. 426), and in
maintaining workmen's compensation laws (New York Central R. Co. v. White, 243 U. S. 188; Mountain Timber Co.
v. Washington, 243 U. S. 219). In dealing with the relation of employer and employed, the legislature has
necessarily a wide field of discretion in order that there may be suitable protection of health and safety, and that
peace and good order may be promoted through regulations designed to insure wholesome conditions of work and
freedom from oppression. Chicago, B. & Q. R. Co. v. McGuire, supra, P. 570.

The point that has been strongly stressed that adult employees should be deemed competent to make their own
contracts was decisively met nearly forty years ago in Holden v. Hardy, supra, where we pointed out the inequality
in the footing of the parties. We said (Id. 169 U. S. 397):

"The legislature has also recognized the fact, which the experience of legislators in many States has corroborated,
that the proprietors of these establishments and their operatives do not stand upon an equality, and that

Page 300 U. S. 394

their interests are, to a certain extent, conflicting. The former naturally desire to obtain as much labor as possible
from their employes, while the latter are often induced by the fear of discharge to conform to regulations which their
judgment, fairly exercised, would pronounce to be detrimental to their health or strength. In other words, the
proprietors lay down the rules and the laborers are practically constrained to obey them. In such cases, self-interest
is often an unsafe guide, and the legislature may properly interpose its authority."

And we added that the fact

"that both parties are of full age and competent to contract does not necessarily deprive the State of the power to
interfere where the parties do not stand upon an equality, or where the public health demands that one party to the
contract shall be protected against himself."

"The State still retains an interest in his welfare, however reckless he may be. The whole is no greater than the sum
of all the parts, and when the individual health, safety and welfare are sacrificed or neglected, the State must suffer."

It is manifest that this established principle is peculiarly applicable in relation to the employment of women, in
whose protection the State has a special interest. That phase of the subject received elaborate consideration in
Muller v. Oregon (1908), 208 U. S. 412, where the constitutional authority of the State to limit the working hours of
women was sustained. We emphasized the consideration that "woman's physical structure and the performance of
maternal functions place her at a disadvantage in the struggle for subsistence," and that her physical wellbeing
"becomes an object of public interest and care in order to preserve the strength and vigor of the race." We
emphasized the need of protecting women against oppression despite her possession of contractual rights. We said
that,

"though limitations upon personal and contractual rights may be removed by legislation, there is that in her

Page 300 U. S. 395

disposition and habits of life which will operate against a full assertion of those rights. She will still be where some
legislation to protect her seems necessary to secure a real equality of right."

Hence, she was

"properly placed in a class by herself, and legislation designed for her protection may be sustained even when like
legislation is not necessary for men and could not be sustained."
 55

We concluded that the limitations which the statute there in question "placed upon her contractual powers, upon her
right to agree with her employer as to the time she shall labor," were "not imposed solely for her benefit, but also
largely for the benefit of all." Again, in Quong Wing v. Kirkendall, 223 U. S. 59, 63, in referring to a differentiation
with respect to the employment of women, we said that the Fourteenth Amendment did not interfere with state
power by creating a "fictitious equality." We referred to recognized classifications on the basis of sex with regard to
hours of work and in other matters, and we observed that the particular points at which that difference shall be
enforced by legislation were largely in the power of the State. In later rulings, this Court sustained the regulation of
hours of work of women employees in Riley v. Massachusetts, 232 U. S. 671 (factories), Miller v. Wilson, 236 U. S.
373 (hotels), and Bosley v. McLaughlin, 236 U. S. 385 (hospitals).

This array of precedents and the principles they applied were thought by the dissenting Justices in the Adkins case to
demand that the minimum wage statute be sustained. The validity of the distinction made by the Court between a
minimum wage and a maximum of hours in limiting liberty of contract was especially challenged. 261 U.S. P. 564.
That challenge persists, and is without any satisfactory answer. As Chief Justice Taft observed:

"In absolute freedom of contract, the one term is as important as the other, for both enter equally into the
consideration given and received, a restriction as to

Page 300 U. S. 396

the one is not greater, in essence, than the other, and is of the same kind. One is the multiplier, and the other the
multiplicand."

And Mr. Justice Holmes, while recognizing that "the distinctions of the law are distinctions of degree," could

"perceive no difference in the kind or degree of interference with liberty, the only matter with which we have any
concern, between the one case and the other. The bargain is equally affected whichever half you regulate."

Id., P. 569.

One of the points which was pressed by the Court in supporting its ruling in the Adkins case was that the standard set
up by the District of Columbia Act did not take appropriate account of the value of the services rendered. In the
Morehead case, the minority thought that the New York statute had met that point in its definition of a "fair wage,"
and that it accordingly presented a distinguishable feature which the Court could recognize within the limits which
the Morehead petition for certiorari was deemed to present. The Court, however, did not take that view, and the New
York Act was held to be essentially the same as that for the District of Columbia. The statute now before us is like
the latter, but we are unable to conclude that, in its minimum wage requirement, the State has passed beyond the
boundary of its broad protective power.

The minimum wage to be paid under the Washington statute is fixed after full consideration by representatives of
employers, employees and the public. It may be assumed that the minimum wage is fixed in consideration of the
services that are performed in the particular occupations under normal conditions. Provision is made for special
licenses at less wages in the case of women who are incapable of full service. The statement of Mr. Justice Holmes
in the Adkins case is pertinent:

"This statute does not compel anybody to pay anything. It simply forbids employment at rates below those fixed as

Page 300 U. S. 397

the minimum requirement of health and right living. It is safe to assume that women will not be employed at even
the lowest wages allowed unless they earn them, or unless the employer's business can sustain the burden. In short
the law, in its character and operation, is like hundreds of so-called police laws that have been upheld."

261 U.S. P. 570. And Chief Justice Taft forcibly pointed out the consideration which is basic in a statute of this
character:
 56

"Legislatures which adopt a requirement of maximum hours or minimum wages may be presumed to believe that,
when sweating employers are prevented from paying unduly low wages by positive law, they will continue their
business, abating that part of their profits which were wrung from the necessities of their employees, and will
concede the better terms required by the law, and that, while in individual cases hardship may result, the restriction
will enure to the benefit of the general class of employees in whose interest the law is passed, and so to that of the
community at large."

Id., P. 563.

We think that the views thus expressed are sound, and that the decision in the Adkins case was a departure from the
true application of the principles governing the regulation by the State of the relation of employer and employed.
Those principles have been reenforced by our subsequent decisions. Thus, in Radice v. New York, 264 U. S. 292, we
sustained the New York statute which restricted the employment of women in restaurants at night. In O'Gorman &
Young v. Hartford Fire Insurance Co., 282 U. S. 251, which upheld an act regulating the commissions of insurance
agents, we pointed to the presumption of the constitutionality of a statute dealing with a subject within the scope of
the police power and to the absence of any factual foundation of record for deciding that the limits of power had
been transcended. In Nebbia v. New York, 291 U. S. 502, dealing

Page 300 U. S. 398

with the New York statute providing for minimum prices for milk, the general subject of the regulation of the use of
private property and of the making of private contracts received an exhaustive examination, and we again declared
that, if such laws

"have a reasonable relation to a proper legislative purpose, and are neither arbitrary nor discriminatory, the
requirements of due process are satisfied;"

that

"with the wisdom of the policy adopted, with the adequacy or practicability of the law enacted to forward it, the
courts are both incompetent and unauthorized to deal;"

that

"times without number, we have said that the legislature is primarily the judge of the necessity of such an enactment,
that every possible presumption is in favor of its validity, and that, though the court may hold views inconsistent
with the wisdom of the law, it may not be annulled unless palpably in excess of legislative power."

Id. p P. 537, 291 U. S. 538.

With full recognition of the earnestness and vigor which characterize the prevailing opinion in the Adkins case, we
find it impossible to reconcile that ruling with these well considered declarations. What can be closer to the public
interest than the health of women and their protection from unscrupulous and overreaching employers? And if the
protection of women is a legitimate end of the exercise of state power, how can it be said that the requirement of the
payment of a minimum wage fairly fixed in order to meet the very necessities of existence is not an admissible
means to that end? The legislature of the State was clearly entitled to consider the situation of women in
employment, the fact that they are in the class receiving the least pay, that their bargaining power is relatively weak,
and that they are the ready victims of those who would take advantage of their necessitous circumstances. The
legislature was entitled to adopt measures to reduce the evils of the "sweating system,"

Page 300 U. S. 399

the exploiting of workers at wages so low as to be insufficient to meet the bare cost of living, thus making their very
helplessness the occasion of a most injurious competition. The legislature had the right to consider that its minimum
wage requirements would be an important aid in carrying out its policy of protection. The adoption of similar
requirements by many States evidences a deep-seated conviction both as to the presence of the evil and as to the
means adapted to check it. Legislative response to that conviction cannot be regarded as arbitrary or capricious, and
 57

that is all we have to decide. Even if the wisdom of the policy be regarded as debatable and its effects uncertain, still
the legislature is entitled to its judgment.

There is an additional and compelling consideration which recent economic experience has brought into a strong
light. The exploitation of a class of workers who are in an unequal position with respect to bargaining power, and
are thus relatively defenceless against the denial of a living wage, is not only detrimental to their health and
wellbeing, but casts a direct burden for their support upon the community. What these workers lose in wages, the
taxpayers are called upon to pay. The bare cost of living must be met. We may take judicial notice of the
unparalleled demands for relief which arose during the recent period of depression and still continue to an alarming
extent despite the degree of economic recovery which has been achieved. It is unnecessary to cite official statistics
to establish what is of common knowledge through the length and breadth of the land. While, in the instant case, no
factual brief has been presented, there is no reason to doubt that the State of Washington has encountered the same
social problem that is present elsewhere. The community is not bound to provide what is, in effect, a subsidy for
unconscionable employers. The

Page 300 U. S. 400

community may direct its lawmaking power to correct the abuse which springs from their selfish disregard of the
public interest. The argument that the legislation in question constitutes an arbitrary discrimination, because it does
not extend to men, is unavailing. This Court has frequently held that the legislative authority, acting within its proper
field, is not bound to extend its regulation to all cases which it might possibly reach. The legislature "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." 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."

There is no "doctrinaire requirement" that the legislation should be couched in all embracing terms. Carroll v.
Greenwich Insurance Co., 199 U. S. 401, 411; Patsone v. Pennsylvania, 232 U. S. 138, 144; Keokee Coke Co. v.
Taylor, 234 U. S. 224, 227; Sproles v. Binford, 286 U. S. 374, 396; Semler v. Oregon Board, 294 U. S. 608, 610,
294 U. S. 611. This familiar principle has repeatedly been applied to legislation which singles out women, and
particular classes of women, in the exercise of the State's protective power. Miller v. Wilson, supra, P. 384; Bosley
v. McLaughlin, supra, p P. 394, 236 U. S. 395; Radice v. New York, supra, p P. 295-298. Their relative need in the
presence of the evil, no less than the existence of the evil itself, is a matter for the legislative judgment.

Our conclusion is that the case of Adkins v. Children's Hospital, supra, should be, and it is, overruled. The judgment
of the Supreme Court of the State of Washington is

Affirmed.
 58

NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937)

Argued February 10, 11, 1937

Decided April 12, 1937*

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT

Page 301 U. S. 22

MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.

In a proceeding under the National Labor Relations Act of 1935, [Footnote 1] the National Labor Relations Board
found that the respondent, Jones & Laughlin Steel Corporation, had violated the Act by engaging in unfair labor
practices affecting commerce. The proceeding was instituted by the Beaver Valley Lodge No. 200, affiliated with
the Amalgamated Association of Iron, Steel and Tin Workers of America, a labor organization. The unfair labor
practices charged were that the corporation was discriminating against members of the union with regard to hire and
tenure of employment, and was coercing and intimidating its employees in order to interfere with their self-
organization. The discriminatory and coercive action alleged was the discharge of certain employees.

The National Labor Relations Board, sustaining the charge, ordered the corporation to cease and desist from such
discrimination and coercion, to offer reinstatement to ten of the employees named, to make good their losses in pay,
and to post for thirty days notices that the corporation would not discharge or discriminate against members, or those
desiring to become members, of the labor union. As the corporation failed to comply, the Board petitioned the
Circuit Court of Appeals to enforce the order. The court denied the petition, holding that the order lay beyond the
range of federal power. 83 F.2d 998. We granted certiorari.

The scheme of the National Labor Relations Act -- which is too long to be quoted in full -- may be briefly stated.
The first section sets forth findings with respect to the injury to commerce resulting from the denial by employers of
the right of employees to organize and from the refusal of employers to accept the procedure of collective

Page 301 U. S. 23

bargaining. There follows a declaration that it is the policy of the United States to eliminate these causes of
obstruction to the free flow of commerce. [Footnote 2] The Act

Page 301 U. S. 24

then defines the terms it uses, including the terms "commerce" and "affecting commerce." § 2. It creates the
National Labor Relations Board, and prescribes its organization. §§ 6. It sets forth the right of employees to self-
organization and to bargain collectively through representatives of their own choosing. § 7. It defines "unfair labor
practices." § 8. It lays down rules as to the representation of employees for the purpose of collective bargaining. § 9.
The Board is empowered to prevent the described unfair labor practices affecting commerce and the Act prescribes
the procedure to that end. The Board is authorized to petition designated courts to secure the enforcement of its
orders. The findings of the Board as to the facts, if supported by evidence, are to be conclusive. If either party, on
application to the court, shows that additional evidence is material and that there were reasonable grounds for the
failure to adduce such evidence in the hearings before the Board, the court may order the additional evidence to be
taken. Any person aggrieved by a final order of the Board may obtain a review in the designated courts with the
same procedure as in the case of an application by the Board for the enforcement of its order. § 10. The Board has
broad powers of investigation. § 11. Interference with members of the Board or its agents in the performance of their
duties is punishable by fine and imprisonment. § 12. Nothing in the Act is to be construed, to interfere with the right
to strike. § 13. There is a separability clause to the effect that, if any provision of the Act or its application to any
person or circumstances shall be held invalid, the remainder of the Act or its application to other persons or
circumstances shall not be affected. § 15. The particular provisions which are involved in the instant case will be
considered more in detail in the course of the discussion. The procedure in the instant case followed the statute. The
labor union filed with the Board its verified charge.
 59

Page 301 U. S. 25

The Board thereupon issued its complaint against the respondent alleging that its action in discharging the
employees in question constituted unfair labor practices affecting commerce within the meaning of § 8, subdivisions
(1) and (3), and § 2, subdivisions (6) and (7) of the Act. Respondent, appearing specially for the purpose of
objecting to the jurisdiction of the Board, filed its answer. Respondent admitted the discharges, but alleged that they
were made because of inefficiency or violation of rule or for other good reasons, and were not ascribable to union
membership or activities. As an affirmative defense, respondent challenged the constitutional validity of the statute
and its applicability in the instant case. Notice of hearing was given, and respondent appeared by counsel. The Board
first took up the issue of jurisdiction, and evidence was presented by both the Board and the respondent. Respondent
then moved to dismiss the complaint for lack of jurisdiction, and, on denial of that motion, respondent, in
accordance with its special appearance, withdrew from further participation in the hearing. The Board received
evidence upon the merits, and, at its close, made its findings and order.

Contesting the ruling of the Board, the respondent argues (1) that the Act is in reality a regulation of labor relations,
and not of interstate commerce; (2) that the Act can have no application to the respondent's relations with its
production employees, because they are not subject to regulation by the federal government, and (3) that the
provisions of the Act violate § 2 of Article III and the Fifth and Seventh Amendments of the Constitution of the
United States.

The facts as to the nature and scope of the business of the Jones & Laughlin Steel Corporation have been found by
the Labor Board, and, so far as they are essential to the determination of this controversy, they are not in dispute.
The Labor Board has found: the corporation is

Page 301 U. S. 26

organized under the laws of Pennsylvania and has its principal office at Pittsburgh. It is engaged in the business of
manufacturing iron and steel in plants situated in Pittsburgh and nearby Aliquippa, Pennsylvania. It manufactures
and distributes a widely diversified line of steel and pig iron, being the fourth largest producer of steel in the United
States. With its subsidiaries -- nineteen in number -- it is a completely integrated enterprise, owning and operating
ore, coal and limestone properties, lake and river transportation facilities, and terminal railroads located at its
manufacturing plants. It owns or controls mines in Michigan and Minnesota. It operates four ore steamships on the
Great Lakes, used in the transportation of ore to its factories. It owns coal mines in Pennsylvania. It operates
towboats and steam barges used in carrying coal to its factories. It owns limestone properties in various places in
Pennsylvania and West Virginia. It owns the Monongahela connecting railroad which connects the plants of the
Pittsburgh works and forms an interconnection with the Pennsylvania, New York Central, and Baltimore and Ohio
Railroad systems. It owns the Aliquippa and Southern Railroad Company, which connects the Aliquippa works with
the Pittsburgh and Lake Erie, part of the New York Central system. Much of its product is shipped to its warehouses
in Chicago, Detroit, Cincinnati and Memphis -- to the last two places by means of its own barges and transportation
equipment. In Long Island City, New York, and in New Orleans, it operates structural steel fabricating shops in
connection with the warehousing of semi-finished materials sent from its works. Through one of its wholly owned
subsidiaries, it owns, leases and operates stores, warehouses and yards for the distribution of equipment and supplies
for drilling and operating oil and gas wells and for pipelines, refineries, and pumping stations. It has sales offices in

Page 301 U. S. 27

twenty cities in the United States and a wholly owned subsidiary which is devoted exclusively to distributing its
product in Canada. Approximately 75 percent. of its product is shipped out of Pennsylvania.

Summarizing these operations, the Labor Board concluded that the works in Pittsburgh and Aliquippa

"might be likened to the heart of a self-contained, highly integrated body. They draw in the raw materials from
Michigan, Minnesota, West Virginia, Pennsylvania, in part through arteries and by means controlled by the
respondent; they transform the materials and then pump them out to all parts of the nation through the vast
mechanism which the respondent has elaborated."
 60

To carry on the activities of the entire steel industry, 33,000 men mine ore, 44,000 men mine coal, 4,000 men quarry
limestone, 16,000 men manufacture coke, 343,000 men manufacture steel, and 83,000 men transport its product.
Respondent has about 10,000 employees in its Aliquippa plant, which is located in a community of about 30,000
persons.

Respondent points to evidence that the Aliquippa plant, in which the discharged men were employed, contains
complete facilities for the production of finished and semi-finished iron and steel products from raw materials; that
its works consist primarily of a byproduct coke plant for the production of coke; blast furnaces for the production of
pig iron; open hearth furnaces and Bessemer converters for the production of steel; blooming mills for the reduction
of steel ingots into smaller shapes, and a number of finishing mills such as structural mills, rod mills, wire mills, and
the like. In addition, there are other buildings, structures and equipment, storage yards, docks and an intra-plant
storage system. Respondent's operations at these works are carried on in two distinct stages, the first being the
conversion of raw materials into pig

Page 301 U. S. 28

iron and the second being the manufacture of semi-finished and finished iron and steel products, and, in both cases,
the operations result in substantially changing the character, utility and value of the materials wrought upon, which
is apparent from the nature and extent of the processes to which they are subjected and which respondent fully
describes. Respondent also directs attention to the fact that the iron ore which is procured from mines in Minnesota
and Michigan and transported to respondent's plant is stored in stockpiles for future use, the amount of ore in storage
varying with the season, but usually being enough to maintain operations from nine to ten months; that the coal
which is procured from the mines of a subsidiary located in Pennsylvania and taken to the plant at Aliquippa is
there, like ore, stored for future use, approximately two to three months' supply of coal being always on hand, and
that the limestone which is obtained in Pennsylvania and West Virginia is also stored in amounts usually adequate to
run the blast furnaces for a few weeks. Various details of operation, transportation, and distribution are also
mentioned which, for the present purpose, it is not necessary to detail.

Practically all the factual evidence in the case, except that which dealt with the nature of respondent's business,
concerned its relations with the employees in the Aliquippa plant whose discharge was the subject of the complaint.
These employees were active leaders in the labor union. Several were officers, and others were leaders of particular
groups. Two of the employees were motor inspectors; one was a tractor driver; three were crane operators; one was
a washer in the coke plant, and three were laborers. Three other employees were mentioned in the complaint, but it
was withdrawn as to one of them and no evidence was heard on the action taken with respect to the other two.

Page 301 U. S. 29

While respondent criticizes the evidence and the attitude of the Board, which is described as being hostile toward
employers and particularly toward those who insisted upon their constitutional rights, respondent did not take
advantage of its opportunity to present evidence to refute that which was offered to show discrimination and
coercion. In this situation, the record presents no ground for setting aside the order of the Board so far as the facts
pertaining to the circumstances and purpose of the discharge of the employees are concerned. Upon that point, it is
sufficient to say that the evidence supports the findings of the Board that respondent discharged these men "because
of their union activity and for the purpose of discouraging membership in the union." We turn to the questions of
law which respondent urges in contesting the validity and application of the Act.

First. The scope of the Act. -- The Act is challenged in its entirety as an attempt to regulate all industry, thus
invading the reserved powers of the States over their local concerns. It is asserted that the references in the Act to
interstate and foreign commerce are colorable, at best; that the Act is not a true regulation of such commerce or of
matters which directly affect it, but, on the contrary, has the fundamental object of placing under the compulsory
supervision of the federal government all industrial labor relations within the nation. The argument seeks support in
the broad words of the preamble (section one [Footnote 3]) and in the sweep of the provisions of the Act, and it is
further insisted that its legislative history shows an essential universal purpose in the light of which its scope cannot
be limited by either construction or by the application of the separability clause.

If this conception of terms, intent, and consequent inseparability were sound, the Act would necessarily fall
 61

Page 301 U. S. 30

by reason of the limitation upon the federal power which inheres in the constitutional grant, as well as because of the
explicit reservation of the Tenth Amendment. Schechter Corp. v. United States, 295 U. S. 495, 549, 295 U. S. 550,
295 U. S. 554. The authority of the federal government may not be pushed to such an extreme as to destroy the
distinction, which the commerce clause itself establishes, between commerce "among the several States" and the
internal concerns of a State. That distinction between what is national and what is local in the activities of commerce
is vital to the maintenance of our federal system. Id.

But we are not at liberty to deny effect to specific provisions, which Congress has constitutional power to enact, by
superimposing upon them inferences from general legislative declarations of an ambiguous character, even if found
in the same statute. The cardinal principle of statutory construction is to save, and not to destroy. We have
repeatedly held that, as between two possible interpretations of a statute, by one of which it would be
unconstitutional and by the other valid, our plain duty is to adopt that which will save the act. Even to avoid a
serious doubt, the rule is the same. Federal Trade Comm'n v. American Tobacco Co., 264 U. S. 298 307; Panama R.
Co. v. Johnson, 264 U. S. 375, 390; Missouri Pacific R. Co. v. Boone, 270 U. S. 466, 472; Blodgett v. Holden, 275
U. S. 142, 148; Richmond Screw Anchor Co. v. United States, 275 U. S. 331, 346.

We think it clear that the National Labor Relations Act may be construed so as to operate within the sphere of
constitutional authority. The jurisdiction conferred upon the Board, and invoked in this instance, is found in § 10(a),
which provides:

"SEC. 10(a). The Board is empowered, as hereinafter provided, to prevent any person from engaging in any unfair
labor practice (listed in section 8) affecting commerce. "

Page 301 U. S. 31

The critical words of this provision, prescribing the limits of the Board's authority in dealing with he labor practices,
are "affecting commerce." The Act specifically defines the "commerce" to which it refers (§ 2(6)):

"The term 'commerce' means trade, traffic, commerce, transportation, or communication among the several States,
or between the District of Columbia or any Territory of the United States and any State or other Territory, or
between any foreign country and any State, Territory, or the District of Columbia, or within the District of Columbia
or any Territory, or between points in the same State but through any other State or any Territory or the District of
Columbia or any foreign country."

There can be no question that the commerce thus contemplated by the Act (aside from that within a Territory or the
District of Columbia) is interstate and foreign commerce in the constitutional sense. The Act also defines the term
"affecting commerce" (§ 2(7)):

"The term 'affecting commerce' means in commerce, or burdening or obstructing commerce or the free flow of
commerce, or having led or tending to lead to a labor dispute burdening or obstructing commerce or the free flow of
commerce."

This definition is one of exclusion as well as inclusion. The grant of authority to the Board does not purport to
extend to the relationship between all industrial employees and employers. Its terms do not impose collective
bargaining upon all industry regardless of effects upon interstate or foreign commerce. It purports to reach only what
may be deemed to burden or obstruct that commerce, and, thus qualified, it must be construed as contemplating the
exercise of control within constitutional bounds. It is a familiar principle that acts which directly burden or obstruct
interstate or foreign commerce, or its free flow, are within the reach of the congressional power. Acts having that
effect are not

Page 301 U. S. 32

rendered immune because they grow out of labor disputes. See Texas & N.O. R . Co. v. Railway Clerks, 281 U. S.
548, 570; Schechter Corp. v. United States, supra, p P. 544, 295 U. S. 545; Virginian Railway v. System Federation,
No. 40, 300 U. S. 515. It is the effect upon commerce, not the source of the injury, which is the criterion. Second
 62

Employers' Liability Cases, 223 U. S. 1, 51. Whether or not particular action does affect commerce in such a close
and intimate fashion as to be subject to federal control, and hence to lie within the authority conferred upon the
Board, is left by the statute to be determined as individual cases arise. We are thus to inquire whether, in the instant
case, the constitutional boundary has been passed.

Second. The fair labor practices in question. -- The unfair labor practices found by the Board are those defined in §
8, subdivisions (1) and (3). These provide:

"Sec. 8. It shall be an unfair labor practice for an employer --"

"(1) To interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7."

"(3) By discrimination in regard to hire or tenure of employment or any term or condition of employment to
encourage or discourage membership in any labor organization. . . . [Footnote 4] "

Page 301 U. S. 33

Section 8, subdivision (1), refers to § 7, which is as follows:

"Sec. 7. Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain
collectively through representatives of their own choosing, and to engage in concerted activities, for the purpose of
collective bargaining or other mutual aid or protection."

Thus, in its present application, the statute goes no further than to safeguard the right of employees to self-
organization and to select representatives of their own choosing for collective bargaining or other mutual protection
without restraint or coercion by their employer.

That is a fundamental right. Employees have as clear a right to organize and select their representatives for lawful
purposes as the respondent has to organize its business and select its own officers and agents. Discrimination and
coercion to prevent the free exercise of the right of employees to self-organization and representation is a proper
subject for condemnation by competent legislative authority. Long ago we stated the reason for labor organizations.
We said that they were organized out of the necessities of the situation; that a single employee was helpless in
dealing with an employer; that he was dependent ordinarily on his daily wage for the maintenance of himself and
family; that, if the employer refused to pay him the wages that he thought fair, he was nevertheless unable to leave
the employ and resist arbitrary and unfair treatment; that union was essential to give laborers opportunity to deal on
an equality with their employer. American Steel Foundries v. Tri-City Central Trades Council, 257 U. S. 184, 209.
We reiterated these views when we had under consideration the Railway Labor Act of 1926. Fully recognizing the
legality of collective action on the part of employees in

Page 301 U. S. 34

order to safeguard their proper interests, we said that Congress was not required to ignore this right, but could
safeguard it. Congress could seek to make appropriate collective action of employees an instrument of peace, rather
than of strife. We said that such collective action would be a mockery if representation were made futile by
interference with freedom of choice. Hence, the prohibition by Congress of interference with the selection of
representatives for the purpose of negotiation and conference between employers and employees, "instead of being
an invasion of the constitutional right of either, was based on the recognition of the rights of both." Texas & N.O. R.
Co. v. Railway Clerks, supra. We have reasserted the same principle in sustaining the application of the Railway
Labor Act as amended in 1934. Virginian Railway Co. v. System Federation, No. 40, supra.

Third. The application of the Act to employees engaged in production. -- The principle involved. -- Respondent says
that whatever may be said of employees engaged in interstate commerce, the industrial relations and activities in the
manufacturing department of respondent's enterprise are not subject to federal regulation. The argument rests upon
the proposition that manufacturing, in itself, is not commerce. Kidd v. Pearson, 128 U. S. 1, 20, 21; United Mine
Workers v. Coronado Coal Co., 259 U. S. 344, 407, 259 U. S. 408; Oliver Iron Co. v. Lord, 262 U. S. 172, 178;
United Leather Workers v. Herkert & Meisel Trunk Co., 265 U. S. 457, 465; Industrial Association v. United States,
 63

268 U. S. 64, 82; Coronado Coal Co. v. United Mine Workers, 268 U. S. 295, 310; Schechter Corp. v. United States,
supra, P. 547; Carter v. Carter Coal Co., 298 U. S. 238, 304, 298 U. S. 317, 298 U. S. 327.

The Government distinguishes these cases. The various parts of respondent's enterprise are described as
interdependent and as thus involving "a great movement of

Page 301 U. S. 35

iron ore, coal and limestone along well defined paths to the steel mills, thence through them, and thence in the form
of steel products into the consuming centers of the country -- a definite and well understood course of business." It is
urged that these activities constitute a "stream" or "flow" of commerce, of which the Aliquippa manufacturing plant
is the focal point, and that industrial strife at that point would cripple the entire movement. Reference is made to our
decision sustaining the Packers and Stockyards Act. [Footnote 5] Stafford v. Wallace, 258 U. S. 495. The Court
found that the stockyards were but a "throat" through which the current of Commerce flowed and the transactions
which there occurred could not be separated from that movement. Hence, the sales at the stockyards were not
regarded as merely local transactions, for, while they created "a local change of title," they did not "stop the flow,"
but merely changed the private interests in the subject of the current. Distinguishing the cases which upheld the
power of the State to impose a nondiscriminatory tax upon property which the owner intended to transport to
another State, but which was not in actual transit and was held within the State subject to the disposition of the
owner, the Court remarked:

"The question, it should be observed, is not with respect to the extent of the power of Congress to regulate interstate
commerce, but whether a particular exercise of state power in view of its nature and operation must be deemed to be
in conflict with this paramount authority."

Id., P. 526. See Minnesota v. Blasius, 290 U. S. 1, 8. Applying the doctrine of Stafford v. Wallace, supra, the Court
sustained the Grain Futures Act of 1922 [Footnote 6] with respect to transactions on the Chicago Board of Trade,
although these transactions were "not in and of themselves interstate commerce." Congress had found

Page 301 U. S. 36

that they had become "a constantly recurring burden and obstruction to that commerce." Chicago Board of Trade v.
Olsen, 262 U. S. 1, 32; compare Hill v. Wallace, 259 U. S. 44, 69. See also Tagg Bros. & Moorhead v. United
States, 280 U. S. 420.

Respondent contends that the instant case presents material distinctions. Respondent says that the Aliquippa plant is
extensive in size and represents a large investment in buildings, machinery and equipment. The raw materials which
are brought to the plant are delayed for long periods and, after being subjected to manufacturing processes, "are
changed substantially as to character, utility and value." The finished products which emerge

"are to a large extent manufactured without reference to preexisting orders and contracts, and are entirely different
from the raw materials which enter at the other end."

Hence, respondent argues that,

"If importation and exportation in interstate commerce do not singly transfer purely local activities into the field of
congressional regulation, it should follow that their combination would not alter the local situation."

Arkadelphia Milling Co. v. St. Louis Southwestern Ry. Co., 249 U. S. 134, 151; Oliver Iron Co. v. Lord, supra.

We do not find it necessary to determine whether these features of defendant's business dispose of the asserted
analogy to the "stream of commerce" cases. The instances in which that metaphor has been used are but particular,
and not exclusive, illustrations of the protective power which the Government invokes in support of the present Act.
The congressional authority to protect interstate commerce from burdens and obstructions is not limited to
transactions which can be deemed to be an essential part of a "flow" of interstate or foreign commerce. Burdens and
obstructions may be due to injurious action springing from other sources. The fundamental principle is that the
power to regulate commerce is
 64

Page 301 U. S. 37

the power to enact "all appropriate legislation" for "its protection and advancement" (The Daniel Ball, 10 Wall. 557,
77 U. S. 564); to adopt measures "to promote its growth and insure its safety" (Mobile County v. Kimball, 102 U. S.
691, 696, 102 U. S. 697); "to foster, protect, control and restrain." Second Employers' Liability Cases, supra, P. 47.
See Texas & N.O. R. Co. v. Railway Clerks, supra. That power is plenary, and may be exerted to protect interstate
commerce "no matter what the source of the dangers which threaten it." Second Employers' Liability Cases, P. 51;
Schechter Corp. v. United States, supra. Although activities may be intrastate in character when separately
considered, if they have such a close and substantial relation to interstate commerce that their control is essential or
appropriate to protect that commerce from burdens and obstructions, Congress cannot be denied the power to
exercise that control. Schechter Corp. v. United States, supra. Undoubtedly the scope of this power 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 indirect and remote that to embrace them, in view of our complex society, would effectually
obliterate the distinction between what is national and what is local and create a completely centralized government.
Id. The question is necessarily one of degree. As the Court said in Chicago Board of Trade v. Olsen, supra, P. 37,
repeating what had been said in Stafford v. Wallace, supra:

"Whatever amounts to more or less constant practice, and threatens to obstruct or unduly to burden the freedom of
interstate commerce is within the regulatory power of Congress under the commerce clause and it is primarily for
Congress to consider and decide the fact of the danger and meet it."

That intrastate activities, by reason of close and intimate relation to interstate commerce, may fall within federal
control is demonstrated in the case of carriers who

Page 301 U. S. 38

are engaged in both interstate and intrastate transportation. There federal control has been found essential to secure
the freedom of interstate traffic from interference or unjust discrimination and to promote the efficiency of the
interstate service. Shreveport Case, 234 U. S. 342, 351, 234 U. S. 352; Wisconsin Railroad Comm'n v. Chicago, B.
& Q. R. Co., 257 U. S. 563, 588. It is manifest that intrastate rates deal primarily with a local activity. But, in
ratemaking, they bear such a close relation to interstate rates that effective control of the one must embrace some
control over the other. Id. Under the Transportation Act, 1920, [Footnote 7] Congress went so far as to authorize the
Interstate Commerce Commission to establish a statewide level of intrastate rates in order to prevent an unjust
discrimination against interstate commerce. Wisconsin Railroad Comm'n v. Chicago, B. & Q. R. Co., supra; Florida
v. United States, 282 U. S. 194, 210, 282 U. S. 211. Other illustrations are found in the broad requirements of the
Safety Appliance Act and the Hours of Service Act. Southern Railway Co. v. United States, 222 U. S. 20; Baltimore
& Ohio R. Co. v. Interstate Commerce Comm'n, 221 U. S. 612. It is said that this exercise of federal power has
relation to the maintenance of adequate instrumentalities of interstate commerce. But the agency is not superior to
the commerce which uses it. The protective power extends to the former because it exists as to the latter.

The close and intimate effect which brings the subject within the reach of federal power may be due to activities in
relation to productive industry although the industry, when separately viewed, is local. This has been abundantly
illustrated in the application of the federal Anti-Trust Act. In the Standard Oil and American Tobacco cases, 221 U.
S. 1, 221 U. S. 106, that statute was applied to combinations of employers engaged in productive industry.

Page 301 U. S. 39

Counsel for the offending corporations strongly urged that the Sherman Act had no application because the acts
complained of were not acts of interstate or foreign commerce, nor direct and immediate in their effect on interstate
or foreign commerce, but primarily affected manufacturing and not commerce. 221 U.S. pp. 5, 125 [argument of
counsel omitted in electronic version]. Counsel relied upon the decision in United States v. Knight Co., 156 U. S. 1.
The Court stated their contention as follows:

"That the act, even if the averments of the bill be true, cannot be constitutionally applied, because to do so would
extend the power of Congress to subjects dehors the reach of its authority to regulate commerce, by enabling that
body to deal with mere questions of production of commodities within the States."
 65

And the Court summarily dismissed the contention in these words:

"But all the structure upon which this argument proceeds is based upon the decision in United States v. E. C. Knight
Co., 156 U. S. 1. The view, however, which the argument takes of that case and the arguments based upon that view
have been so repeatedly pressed upon this court in connection with the interpretation and enforcement of the Anti-
trust Act, and have been so necessarily and expressly decided to be unsound as to cause the contentions to be plainly
foreclosed and to require no express notice"

(citing cases). 221 U.S. p P. 68, 221 U. S. 69.

Upon the same principle, the Anti-Trust Act has been applied to the conduct of employees engaged in production.
Loewe v.Lawlor, 208 U. S. 274; Coronado Coal Co. v. United Mine Workers, supra; Bedford Cut Stone Co. v. Stone
Cutters' Assn., 274 U. S. 37. See also Local 16 v. United States, 291 U. S. 293, 397; Schechter Corp. v. United
States, supra. The decisions dealing with the question of that application illustrate both the principle and its
limitation. Thus, in the first Coronado case, the Court held that mining was not interstate commerce, that the power
of Congress did not extend to its regulation as such,

Page 301 U. S. 40

and that it had not been shown that the activities there involved -- a local strike -- brought them within the provisions
of the Anti-Trust Act, notwithstanding the broad terms of that statute. A similar conclusion was reached in United
Leather Workers v. Herkert & Meisel Trunk Co., supra, Industrial Association v. United States, supra, and Levering
& Garrigues Co. v. Morrin, 289 U. S. 103, 107. But, in the first Coronado case, the Court also said that

"if Congress deems certain recurring practices, though not really part of interstate commerce, likely to obstruct,
restrain or burden it, it has the power to subject them to national supervision and restraint."

259 U.S. P. 408. And, in the second Coronado case, the Court ruled that, while the mere reduction in the supply of
an article to be shipped in interstate commerce by the illegal or tortious prevention of its manufacture or production
is ordinarily an indirect and remote obstruction to that commerce, nevertheless when the

"intent of those unlawfully preventing the manufacture or production is shown to be to restrain or control the supply
entering and moving in interstate commerce, or the price of it in interstate markets, their action is a direct violation
of the Anti-Trust Act."

268 U.S. P. 310. And the existence of that intent may be a necessary inference from proof of the direct and
substantial effect produced by the employees' conduct. Industrial Association v. United States, 268 U.S. P. 81. What
was absent from the evidence in the first Coronado case appeared in the second, and the Act was accordingly
applied to the mining employees.

It is thus apparent that the fact that the employees here concerned were engaged in production is not determinative.
The question remains as to the effect upon interstate commerce of the labor practice involved. In the Schechter case,
supra, we found that the effect there was so remote as to be beyond the federal power. To find "immediacy or
directness" there was to find it "almost

Page 301 U. S. 41

everywhere," a result inconsistent with the maintenance of our federal system. In the Carter case, supra, the Court
was of the opinion that the provisions of the statute relating to production were invalid upon several grounds -- that
there was improper delegation of legislative power, and that the requirements not only went beyond any sustainable
measure of protection of interstate commerce, but were also inconsistent with due process. These cases are not
controlling here.

Fourth. Effects of the unfair labor practice in respondent's enterprise. -- Giving full weight to respondent's
contention with respect to a break in the complete continuity of the "stream of commerce" by reason of respondent's
manufacturing operations, the fact remains that the stoppage of those operations by industrial strife would have a
most serious effect upon interstate commerce. In view of respondent's far-flung activities, it is idle to say that the
 66

effect would be indirect or remote. It is obvious that it would be immediate, and might be catastrophic. We are asked
to shut our eyes to the plainest facts of our national life, and to deal with the question of direct and indirect effects in
an intellectual vacuum. Because there may be but indirect and remote effects upon interstate commerce in
connection with a host of local enterprises throughout the country, it does not follow that other industrial activities
do not have such a close and intimate relation to interstate commerce as to make the presence of industrial strife a
matter of the most urgent national concern. When industries organize themselves on a national scale, making their
relation to interstate commerce the dominant factor in their activities, how can it be maintained that their industrial
labor relations constitute a forbidden field into which Congress may not enter when it is necessary to protect
interstate commerce from the paralyzing consequences of industrial war? We have often said that interstate
commerce itself is a practical

Page 301 U. S. 42

conception. It is equally true that interferences with that commerce must be appraised by a judgment that does not
ignore actual experience.

Experience has abundantly demonstrated that the recognition of the right of employees to self-organization and to
have representatives of their own choosing for the purpose of collective bargaining is often an essential condition of
industrial peace. Refusal to confer and negotiate has been one of the most prolific causes of strife. This is such an
outstanding fact in the history of labor disturbances that it is a proper subject of judicial notice, and requires no
citation of instances. The opinion in the case of Virginian Railway Co. v. System Federation, No. 40, supra, points
out that, in the case of carriers, experience has shown that, before the amendment of 1934 of the Railway Labor Act,

"when there was no dispute as to the organizations authorized to represent the employees and when there was a
willingness of the employer to meet such representative for a discussion of their grievances, amicable adjustment of
differences had generally followed, and strikes had been avoided."

That, on the other hand,

"a prolific source of dispute had been the maintenance by the railroad of company unions and the denial by railway
management of the authority of representatives chosen by their employees."

The opinion in that case also points to the large measure of success of the labor policy embodied in the Railway
Labor Act. But, with respect to the appropriateness of the recognition of self-organization and representation in the
promotion of peace, the question is not essentially different in the case of employees in industries of such a character
that interstate commerce is put in jeopardy from the case of employees of transportation companies. And of what
avail is it to protect the facility of transportation if interstate commerce is throttled with respect to the commodities
to be transported!

Page 301 U. S. 43

These questions have frequently engaged the attention of Congress, and have been the subject of many inquiries.
[Footnote 8] The steel industry is one of the great basic industries of the United States, with ramifying activities
affecting interstate commerce at every point. The Government aptly refers to the steel strike of 1919-1920, with its
far-reaching consequences. [Footnote 9] The fact that there appears to have been no major disturbance in that
industry in the more recent period did not dispose of the possibilities of future and like dangers to interstate
commerce which Congress was entitled to foresee and to exercise its protective power to forestall. It is not necessary
again to detail the facts as to respondent's enterprise. Instead of being beyond the pale, we think that it presents in a
most striking way the close and intimate relation which a manufacturing industry may have to interstate commerce,
and we have no doubt that Congress had constitutional authority to safeguard the right of respondent's employees to
self-organization and freedom in the choice of representatives for collective bargaining.

Fifth. The means which the Act employs. -- Questions under the due process clause and other constitutional
restrictions. -- Respondent asserts its right to conduct its business in an orderly manner without being subjected to
arbitrary restraints. What we have said points to the fallacy in the argument. Employees have their correlative

Page 301 U. S. 44
 67

right to organize for the purpose of securing the redress of grievances and to promote agreements with employers
relating to rates of pay and conditions of work. Texas & N.O. R. Co. v. Railway Clerks, supra; Virginian Railway
Co. v. System Federation, No. 40. Restraint for the purpose of preventing an unjust interference with that right
cannot be considered arbitrary or capricious. The provision of § 9(a) [Footnote 10] that representatives, for the
purpose of collective bargaining, of the majority of the employees in an appropriate unit shall be the exclusive
representatives of all the employees in that unit imposes upon the respondent only the duty of conferring and
negotiating with the authorized representatives of its employees for the purpose of settling a labor dispute. This
provision has its analogue in § 2, Ninth, of the Railway Labor Act, which was under consideration in Virginian
Railway Co. v. System Federation, No. 40, supra. The decree which we affirmed in that case required the Railway
Company to treat with the representative chosen by the employees and also to refrain from entering into collective
labor agreements with anyone other than their true representative as ascertained in accordance with the provisions of
the Act. We said that the obligation to treat with the true representative was exclusive, and hence imposed the
negative duty to treat with no other. We also pointed out that, as conceded by the Government, [Footnote 11] the
injunction

Page 301 U. S. 45

against the Company's entering into any contract concerning rules, rates of pay and working conditions except with
a chosen representative was "designed only to prevent collective bargaining with anyone purporting to represent
employees" other than the representative they had selected. It was taken "to prohibit the negotiation of labor
contracts generally applicable to employees" in the described unit with any other representative than the one so
chosen, "but not as precluding such individual contracts" as the Company might "elect to make directly with
individual employees." We think this construction also applies to § 9(a) of the National Labor Relations Act.

The Act does not compel agreements between employers and employees. It does not compel any agreement
whatever. It does not prevent the employer "from refusing to make a collective contract and hiring individuals on
whatever terms" the employer "may by unilateral action determine." [Footnote 12] The Act expressly provides in §
9(a) that any individual employee or a group of employees shall have the right at any time to present grievances to
their employer. The theory of the Act is that free opportunity for negotiation with accredited representatives of
employees is likely to promote industrial peace, and may bring about the adjustments and agreements which the Act,
in itself, does not attempt to compel. As we said in Texas & N.O. R. Co. v. Railway Clerks, supra, and repeated in
Virginian Railway Co. v. System Federation, No. 40, supra, the cases of Adair v. United States, 208 U. S. 161, and
Coppage v. Kansas, 236 U. S. 1, are inapplicable to legislation of this character. The Act does not interfere with the
normal exercise of the right of the employer to select its employees or to discharge them. The employer may not,
under cover of that right, intimidate or coerce its employees with respect to their

Page 301 U. S. 46

self-organization and representation, and, on the other hand, the Board is not entitled to make its authority a pretext
for interference with the right of discharge when that right is exercised for other reasons than such intimidation and
coercion. The true purpose is the subject of investigation with full opportunity to show the facts. It would seem that,
when employers freely recognize the right of their employees to their own organizations and their unrestricted right
of representation, there will be much less occasion for controversy in respect to the free and appropriate exercise of
the right of selection and discharge.

The Act has been criticized as one-sided in its application; that it subjects the employer to supervision and restraint
and leaves untouched the abuses for which employees may be responsible; that it fails to provide a more
comprehensive plan -- with better assurances of fairness to both sides and with increased chances of success in
bringing about, if not compelling, equitable solutions of industrial disputes affecting interstate commerce. But we
are dealing with the power of Congress, not with a particular policy or with the extent to which policy should go.
We have frequently said that the legislative authority, exerted within its proper field, need not embrace all the evils
within its reach. The Constitution does not forbid "cautious advance, step by step," in dealing with the evils which
are exhibited in activities within the range of legislative power. Carroll v. Greenwich Insurance Co., 199 U. S. 401,
411; Keokee Coke Co. v. Taylor, 234 U. S. 224, 227; Miller v. Wilson, 236 U. S. 373, 384; Sproles v. Binford, 286
U. S. 374, 396. The question in such cases is whether the legislature, in what it does prescribe, has gone beyond
constitutional limits.
 68

The procedural provisions of the Act are assailed. But these provisions, as we construe them, do not offend against
the constitutional requirements governing the

Page 301 U. S. 47

creation and action of administrative bodies. See Interstate Commerce Comm'n v. Louisville & Nashville R. Co., 227
U. S. 88, 91. The Act establishes standards to which the Board must conform. There must be complaint, notice and
hearing. The Board must receive evidence and make findings. The findings as to the facts are to be conclusive, but
only if supported by evidence. The order of the Board is subject to review by the designated court, and only when
sustained by the court may the order be enforced. Upon that review, all questions of the jurisdiction of the Board and
the regularity of its proceedings, all questions of constitutional right or statutory authority, are open to examination
by the court. We construe the procedural provisions as affording adequate opportunity to secure judicial protection
against arbitrary action in accordance with the well settled rules applicable to administrative agencies set up by
Congress to aid in the enforcement of valid legislation. It is not necessary to repeat these rules which have
frequently been declared. None of them appears to have been transgressed in the instant case. Respondent was
notified and heard. It had opportunity to meet the charge of unfair labor practices upon the merits, and, by
withdrawing from the hearing, it declined to avail itself of that opportunity. The facts found by the Board support its
order, and the evidence supports the findings. Respondent has no just ground for complaint on this score.

The order of the Board required the reinstatement of the employees who were found to have been discharged
because of their "union activity" and for the purpose of "discouraging membership in the union." That requirement
was authorized by the Act. § 10(c). In Texas & N.O. R. Co. v. Railway Clerks, supra, a similar order for restoration
to service was made by the court in contempt proceedings for the violation of an injunction issued by the court to
restrain an interference with

Page 301 U. S. 48

the right of employees as guaranteed by the Railway Labor Act of 1926. The requirement of restoration to service of
employees discharged in violation of the provisions of that Act was thus a sanction imposed in the enforcement of a
judicial decree. We do not doubt that Congress could impose a like sanction for the enforcement of its valid
regulation. The fact that, in the one case, it was a judicial sanction, and, in the other, a legislative one, is not an
essential difference in determining its propriety.

Respondent complains that the Board not only ordered reinstatement but directed the payment of wages for the time
lost by the discharge, less amounts earned by the employee during that period. This part of the order was also
authorized by the Act. § 10(c). It is argued that the requirement is equivalent to a money judgment and hence
contravenes the Seventh Amendment with respect to trial by jury. The Seventh Amendment provides that, "In suits
at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be
preserved." The Amendment thus preserves the right which existed under the common law when the Amendment
was adopted. Shields v. Thomas, 18 How. 253, 59 U. S. 262; In re Wood, 210 U. S. 246, 258; Dimick v. Schiedt, 293
U. S. 474, 476; Baltimore & Carolina Line v. Redman, 295 U. S. 654, 657. Thus, it has no application to cases
where recovery of money damages is an incident to equitable relief even though damages might have been
recovered in an action at law. Clark v. Wooster, 119 U. S. 322, 325; Pease v. Rathbun-Jones Engineering Co., 243
U. S. 273, 279. It does not apply where the proceeding is not in the nature of a suit at common law. Guthrie
National Bank v. Guthrie, 173 U. S. 528, 537.

The instant case is not a suit at common law or in the nature of such a suit. The proceeding is one unknown to the
common law. It is a statutory proceeding. Reinstatement of the employee and payment for time lost are

Page 301 U. S. 49

requirements imposed for violation of the statute, and are remedies appropriate to its enforcement. The contention
under the Seventh Amendment is without merit.

Our conclusion is that the order of the Board was within its competency, and that the Act is valid as here applied.
The judgment of the Circuit Court of Appeals is reversed, and the cause is remanded for further proceedings in
conformity with this opinion. Reversed.
 69

Missouri ex rel. Gaines v. Canada, 305 U.S. 337 (1938)

Argued November 9, 1938

Decided December 12, 1938

CERTIORARI TO THE SUPREME COURT OF MISSOURI

Syllabus

1. The State of Missouri provides separate schools and universities for whites and negroes. At the state university,
attended by whites, there is a course in law; at the Lincoln University, attended by negroes, there is as yet none, but
it is the duty of the curators of that institution to establish one there whenever in their opinion this shall be necessary
and practicable, and pending such development, they are authorized to arrange for legal education of Missouri
negroes, and to pay the tuition charges therefor, at law schools in adjacent States where negroes are accepted and
where the training is equal to that obtainable at the Missouri State University. Pursuant to the State's policy of
separating the races in its educational institutions, the curators of the state university refused to admit a negro as a
student in the law school there because of his race; whereupon he sought a mandamus, in the state courts, which was
denied.

Page 305 U. S. 342

MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.

Petitioner Lloyd Gaines, a negro, was refused admission to the School of Law at the State University of Missouri.
Asserting that this refusal constituted a denial by the State of the equal protection of the laws in violation of the
Fourteenth Amendment of the Federal Constitution, petitioner brought this action for mandamus to compel the
curators of the University to admit him. On final hearing, an alternative writ was quashed and a peremptory writ was
denied by the Circuit Court. The Supreme Court of the State affirmed the judgment. 113 S.W.2d 783. We granted
certiorari, October 10, 1938.

Petitioner is a citizen of Missouri. In August, 1935, he was graduated with the degree of Bachelor of Arts at the
Lincoln University, an institution maintained by the State of Missouri for the higher education of negroes. That
University has no law school. Upon the filing of his application for admission to the law school of the University of
Missouri, the registrar advised him to communicate with the president of Lincoln University, and the latter directed
petitioner's attention to § 9622 of the Revised Statutes of Missouri (1929), providing as follows:

"Sec. 9622. May arrange for attendance at university of any adjacent state -- Tuition fees. -- Pending the full
development of the Lincoln university, the board of

Page 305 U. S. 343

curators shall have the authority to arrange for the attendance of negro residents of the state of Missouri at the
university of any adjacent state to take any course or to study any subjects provided for at the state university of
Missouri, and which are not taught at the Lincoln university and to pay the reasonable tuition fees for such
attendance; provided that, whenever the board of curators deem it advisable, they shall have the power to open any
necessary school or department. (Laws 1921, p. 86, § 7.)"

Petitioner was advised to apply to the State Superintendent of Schools for aid under that statute. It was admitted on
the trial that petitioner's

"work and credits at the Lincoln University would qualify him for admission to the School of Law of the University
of Missouri if he were found otherwise eligible."

He was refused admission upon the ground that it was "contrary to the constitution, laws and public policy of the
State to admit a negro as a student in the University of Missouri." It appears that there are schools of law in
connection with the state universities of four adjacent States, Kansas, Nebraska, Iowa and Illinois, where
nonresident negroes are admitted.
 70

The clear and definite conclusions of the state court in construing the pertinent state legislation narrow the issue. The
action of the curators, who are representatives of the State in the management of the state university (R.S.Mo. §
9625), must be regarded as state action. [Footnote 1] The state constitution provides that separate free public schools
shall be established for the education of children of African descent (Art. XI, § 3), and, by statute, separate high
school facilities are supplied for colored students equal to those provided for white students (R.S.Mo.

Page 305 U. S. 344

§§ 9346-9349). While there is no express constitutional provision requiring that the white and negro races be
separated for the purpose of higher education, the state court, on a comprehensive review of the state statutes, held
that it was intended to separate the white and negro races for that purpose also. Referring in particular to Lincoln
University, the court deemed it to be clear

"that the Legislature intended to bring the Lincoln University up to the standard of the University of Missouri, and
give to the whites and negroes an equal opportunity for higher education -- the whites at the University of Missouri,
and the negroes at Lincoln University."

Further, the court concluded that the provisions of § 9622 (above-quoted) to the effect that negro residents "may
attend the university of any adjacent State with their tuition paid, pending the full development of Lincoln
University," made it evident "that the Legislature did not intend that negroes and whites should attend the same
university in this State." In that view, it necessarily followed that the curators of the University of Missouri acted in
accordance with the policy of the State in denying petitioner admission to its School of Law upon the sole ground of
his race.

In answering petitioner's contention that this discrimination constituted a denial of his constitutional right, the state
court has fully recognized the obligation of the State to provide negroes with advantages for higher education
substantially equal to the advantages afforded to white students. The State has sought to fulfill that obligation by
furnishing equal facilities in separate schools, a method the validity of which has been sustained by our decisions.
Plessy v. Ferguson, 163 U. S. 537, 544; McCabe v. Atchison, T. & S.F. Ry. Co., 235 U. S. 151, 160; Gong Lum v.
Rice, 275 U. S. 78, 85, 275 U. S. 86. Compare Cumming v. Board of Education, 175 U. S. 528, 544, 175 U. S. 545.
Respondents' counsel have appropriately emphasized the special

Page 305 U. S. 345

solicitude of the State for the higher education of negroes as shown in the establishment of Lincoln University, a
state institution well conducted on a plane with the University of Missouri so far as the offered courses are
concerned. It is said that Missouri is a pioneer in that field and is the only State in the Union which has established a
separate university for negroes on the same basis as the state university for white students. But, commendable as is
that action, the fact remains that instruction in law for negroes is not now afforded by the State, either at Lincoln
University or elsewhere within the State, and that the State excludes negroes from the advantages of the law school
it has established at the University of Missouri.

It is manifest that this discrimination, if not relieved by the provisions we shall presently discuss, would constitute a
denial of equal protection. That was the conclusion of the Court of Appeals of Maryland in circumstances
substantially similar in that aspect. University of Maryland v. Murray, 169 Md. 478, 182 A. 590. It there appeared
that the State of Maryland had "undertaken the function of education in the law," but had "omitted students of one
race from the only adequate provision made for it, and omitted them solely because of their color"; that, if those
students were to be offered "equal treatment in the performance of the function, they must, at present, be admitted to
the one school provided." Id., p. 489. A provision for scholarships to enable negroes to attend colleges outside the
State, mainly for the purpose of professional studies, was found to be inadequate (Id. pp. 485, 486), and the question
"whether with aid in any amount it is sufficient to send the negroes outside the State for legal education" the Court
of Appeals found it unnecessary to discuss. Accordingly, a writ of mandamus to admit the applicant was issued to
the officers and

Page 305 U. S. 346

regents of the University of Maryland as the agents of the State entrusted with the conduct of that institution.
 71

The Supreme Court of Missouri in the instant case has distinguished the decision in Maryland upon the grounds --
(1) that, in Missouri, but not in Maryland, there is "a legislative declaration of a purpose to establish a law school for
negroes at Lincoln University whenever necessary or practical", and (2) that,

"pending the establishment of such a school, adequate provision has been made for the legal education of negro
students in recognized schools outside of this State."

113 S.W.2d p. 791.

As to the first ground, it appears that the policy of establishing a law school at Lincoln University has not yet
ripened into an actual establishment, and it cannot be said that a mere declaration of purpose, still unfulfilled, is
enough. The provision for legal education at Lincoln is at present entirely lacking. Respondents' counsel urge that,
if, on the date when petitioner applied for admission to the University of Missouri, he had instead applied to the
curators of Lincoln University, it would have been their duty to establish a law school; that this "agency of the
State," to which he should have applied, was "specifically charged with the mandatory duty to furnish him what he
seeks." We do not read the opinion of the Supreme Court as construing the state statute to impose such a "mandatory
duty" as the argument seems to assert. The state court quoted the language of § 9618, R.S.Mo.1929, set forth in the
margin, [Footnote 2] making it the mandatory

Page 305 U. S. 347

duty of the board of curators to establish a law school in Lincoln University "whenever necessary and practicable in
their opinion." This qualification of their duty, explicitly stated in the statute, manifestly leaves it to the judgment of
the curators to decide when it will be necessary and practicable to establish a law school, and the state court so
construed the statute. Emphasizing the discretion of the curators, the court said:

"The statute was enacted in 1921. Since its enactment, no negro, not even appellant, has applied to Lincoln
University for a law education. This fact demonstrates the wisdom of the legislature in leaving it to the judgment of
the board of curators to determine when it would be necessary or practicable to establish a law school for negroes at
Lincoln University. Pending that time, adequate provision is made for the legal education of negroes in the
university of some adjacent State, as heretofore pointed out."

113 S.W.2d p. 791.

The state court has not held that it would have been the duty of the curators to establish a law school at Lincoln
University for the petitioner on his application. Their duty, as the court defined it, would have been either to supply
a law school at Lincoln University as provided in § 9618 or to furnish him the opportunity to obtain his legal
training in another State, as provided in § 9622

Thus, the law left the curators free to adopt the latter course. The state court has not ruled or intimated that their
failure or refusal to establish a law school for a very few students, still less for one student, would have been an
abuse of the discretion with which the curators were entrusted. And, apparently, it was because of that discretion,

Page 305 U. S. 348

and of the postponement which its exercise in accordance with the terms of the statute would entail until necessity
and practicability appeared, that the state court considered and upheld as adequate the provision for the legal
education of negroes, who were citizens of Missouri, in the universities of adjacent States. We may put on one side
respondent's contention that there were funds available at Lincoln University for the creation of a law department
and the suggestions with respect to the number of instructors who would be needed for that purpose and the cost of
supplying them. The president of Lincoln University did not advert to the existence or prospective use of funds for
that purpose when he advised petitioner to apply to the State Superintendent of Schools for aid under § 9622. At
best, the evidence to which argument as to available funds is addressed admits of conflicting inferences, and the
decision of the state court did not hinge on any such matter. In the light of its ruling, we must regard the question
whether the provision for the legal education in other States of negroes resident in Missouri is sufficient to satisfy
the constitutional requirement of equal protection as the pivot upon which this case turns.
 72

The state court stresses the advantages that are afforded by the law schools of the adjacent States -- Kansas,
Nebraska, Iowa and Illinois -- which admit nonresident negroes. The court considered that these were schools of
high standing where one desiring to practice law in Missouri can get "as sound, comprehensive, valuable legal
education" as in the University of Missouri; that the system of education in the former is the same as that in the
latter, and is designed to give the students a basis for the practice of law in any State where the Anglo-American
system of law obtains; that the law school of the University of Missouri does not specialize in Missouri law, and that
the course of study and the case books used

Page 305 U. S. 349

in the five schools are substantially identical. Petitioner insists that, for one intending to practice in Missouri, there
are special advantages in attending a law school there, both in relation to the opportunities for the particular study of
Missouri law and for the observation of the local courts [Footnote 3] and also in view of the prestige of the Missouri
law school among the citizens of the State, his prospective clients. Proceeding with its examination of relative
advantages, the state court found that the difference in distances to be traveled afforded no substantial ground of
complaint, and that there was an adequate appropriation to meet the full tuition fees which petitioner would have to
pay.

We think that these matters are beside the point. The basic consideration is not as to what sort of opportunities other
States provide, or whether they are as good as those in Missouri, but as to what opportunities Missouri itself
furnishes to white students and denies to negroes solely upon the ground of color. The admissibility of laws
separating the races in the enjoyment of privileges afforded by the State rests wholly upon the equality of the
privileges which the laws give to the separated groups within the State. The question here is not of a duty of the
State to supply legal training, or of the quality of the training which it does supply, but of its duty when it provides
such training to furnish it to the residents of the State upon the basis of an equality of right. By the operation of the
laws of Missouri, a privilege has been created for white law students which is denied to negroes by reason of their
race. The white resident is afforded legal education within the State; the negro resident having the same
qualifications is refused it there, and must go outside the State to obtain it. That is a denial of the equality of legal
right to the enjoyment of the privilege

Page 305 U. S. 350

which the State has set up, and the provision for the payment of tuition fees in another State does not remove the
discrimination.

The equal protection of the laws is "a pledge of the protection of equal laws." Yick Wo v. Hopkins, 118 U. S. 356,
369. Manifestly, the obligation of the State to give the protection of equal laws can be performed only where its laws
operate, that is, within its own jurisdiction. It is there that the equality of legal right must be maintained. That
obligation is imposed by the Constitution upon the States severally as governmental entities -- each responsible for
its own laws establishing the rights and duties of persons within its borders. It is an obligation the burden of which
cannot be cast by one State upon another, and no State can be excused from performance by what another State may
do or fail to do. That separate responsibility of each State within its own sphere is of the essence of statehood
maintained under our dual system. It seems to be implicit in respondents' argument that, if other States did not
provide courses for legal education, it would nevertheless be the constitutional duty of Missouri, when it supplied
such courses for white students, to make equivalent provision for negroes. But that plain duty would exist because it
rested upon the State independently of the action of other States. We find it impossible to conclude that what
otherwise would be an unconstitutional discrimination, with respect to the legal right to the enjoyment of
opportunities within the State, can be justified by requiring resort to opportunities elsewhere. That resort may
mitigate the inconvenience of the discrimination, but cannot serve to validate it.

Nor can we regard the fact that there is but a limited demand in Missouri for the legal education of negroes as
excusing the discrimination in favor of whites. We had occasion to consider a cognate question in the case

Page 305 U. S. 351

of McCabe v. Atchison, T. & S.F. Ry. Co., supra. There, the argument was advanced, in relation to the provision by
a carrier of sleeping cars, dining, and chair cars, that the limited demand by negroes justified the State in permitting
 73

the furnishing of such accommodations exclusively for white persons. We found that argument to be without merit.
It made, we said, the constitutional right

"depend upon the number of persons who may be discriminated against, whereas the essence of the constitutional
right is that it is a personal one. Whether or not particular facilities shall be provided may doubtless be conditioned
upon there being a reasonable demand therefor, but, if facilities are provided, substantial equality of treatment of
persons traveling under like conditions cannot be refused. It is the individual who is entitled to the equal protection
of the laws, and if he is denied by a common carrier, acting in the matter under the authority of a state law, a facility
or convenience in the course of his journey which under substantially the same circumstances is furnished to another
traveler, he may properly complain that his constitutional privilege has been invaded."

Id. p P. 161, 235 U. S. 162.

Here, petitioner's right was a personal one. It was as an individual that he was entitled to the equal protection of the
laws, and the State was bound to furnish him within its borders facilities for legal education substantially equal to
those which the State there afforded for persons of the white race, whether or not other negroes sought the same
opportunity.

It is urged, however, that the provision for tuition outside the State is a temporary one -- that it is intended to operate
merely pending the establishment of a law department for negroes at Lincoln University. While, in that sense, the
discrimination may be termed temporary, it may nevertheless continue for an indefinite period by reason of the
discretion given to the curators of Lincoln

Page 305 U. S. 352

University and the alternative of arranging for tuition in other States, as permitted by the state law as construed by
the state court, so long as the curators find it unnecessary and impracticable to provide facilities for the legal
instruction of negroes within the State. In that view, we cannot regard the discrimination as excused by what is
called its temporary character.

We do not find that the decision of the state court turns on any procedural question. The action was for mandamus,
but it does not appear that the remedy would have been deemed inappropriate if the asserted federal right had been
sustained. In that situation, the remedy by mandamus was found to be a proper one in University of Maryland v.
Murray, supra. In the instant case, the state court did note that petitioner had not applied to the management of
Lincoln University for legal training. But, as we have said, the state court did not rule that it would have been the
duty of the curators to grant such an application, but, on the contrary, took the view, as we understand it, that the
curators were entitled under the state law to refuse such an application and, in its stead, to provide for petitioner's
tuition in an adjacent State. That conclusion presented the federal question as to the constitutional adequacy of such
a provision while equal opportunity for legal training within the State was not furnished, and this federal question
the state court entertained and passed upon. We must conclude that, in so doing, the court denied the federal right
which petitioner set up and the question as to the correctness of that decision is before us. We are of the opinion that
the ruling was error, and that petitioner was entitled to be admitted to the law school of the State University in the
absence of other and proper provision for his legal training within the State.

The judgment of the Supreme Court of Missouri is reversed, and the cause is remanded for further proceedings not
inconsistent with this opinion.

Reversed.