Petitioner
Stafford and Company, a firm engaged in the buying and selling of livestock
Respondent
Henry C. Wallace, U.S. Secretary of Agriculture
Petitioner's Claim
That the operation of stockyards did not constitute interstate commerce, andtherefore Congress did not have authority under the commerce clause of the U.S. Constitution to enforce the Packers and Stockyards Act of 1921.
Chief Lawyer for Petitioner
E. Godman
Chief Lawyer for Respondent
James Montgomery Beck, U.S. Solicitor General
Justices for the Court
Louis D. Brandeis, John Hessin Clarke, Oliver Wendell Holmes, Joseph McKenna,Mahlon Pitney, William Howard Taft (writing for the Court), Willis Van Devanter
Justices Dissenting
James Clark McReynolds (William Rufus Day did not participate)
Place
Washington, D.C.
Date of Decision
1 May 1922
Decision
Upheld the authority of Congress to enforce the act over stockyards, which the Court ruled were not "places of rest or a final destination," but rather "athroat through which the current of commerce flows."
Significance
Stafford v. Wallace marked a milestone in the Court's interpretation of the powers granted to Congress under Article I, Section 8 of the U.S. Constitution. Specifically, Stafford expanded the "stream of commerce" doctrine introduced by Justice Holmes in Swift and Co. v. United States (1905). With Stafford, the Court determined that Congress had the further power to curb monopolistic business practices in intrastate industries thatbelonged to a stream of interstate commerce. As such, the case helped signalthe Court's trend in the first half of the twentieth century toward an interpretation of interstate commerce favorable to the powers of the government.
Stockyards in the Stream of Commerce
In the early 1900s, the stockyards of Chicago, along with the steel mills ofPittsburgh and the financial markets of New York City, seemed to be a symbolof American economic power. Not surprisingly, perhaps, writer Upton Sinclairhad set his controversial novel The Jungle (1906), which exposed corruption and brutality in business, in the stockyards of Chicago. Through the facilities of companies such as the Union Stockyards & Transit Company, which was incorporated under Illinois law in 1865, passed some 15 million cattle, calves, hogs, and sheep in 1920. This made the stockyards of Chicago the largest in the world. And as the Supreme Court was to discover, some five companies held virtual control over the operations of the Union and other stockyards in the great Chicago livestock center.
When Stafford v. Wallace went before the Supreme Court, Chief JusticeTaft went to great lengths in order to establish the extent to which the Chicago stockyards constituted a single point, by no means a terminal one, alonga vast stream of interstate commerce. From their point of origin in diverse livestock-raising locales, cattle from Wyoming, sheep from Montana, and hogs from Kansas (to use a few likely examples) would be shipped by farmers to a commission merchant at the Chicago stockyards, with whom the farmer had an agreement to sell the livestock on consignment. Thus the commission merchant didnot pay for the livestock; he simply arranged their sale and would take a portion of the profits. Upon receiving the live animals, he would have them driven from the cars to assigned pens, where they would be watered and fed.
In the bill submitted by Stafford's lawyer, E. Godman, to the Supreme Court in Stafford v. Wallace, the petitioner would attempt to establish thatthis constituted the completion of the transportation of the livestock. Through Godman, Stafford would further assert that livestock consigned to commission merchants were sold by them for a commission, and not "on their own account" as owners; that sales took place only at the stockyard and nowhere else; that such commissions were fixed at a certain price per head; and that the commission merchants simply passed the payment along to the original owners andshippers, minus their own commissions and other expenses. Stafford's counselpresented a number of other claims, all of them intending to show that shipment through the stockyards did not constitute a continuous flow of commercialactivity, but rather that there was a series of transactions starting and stopping, from farmer to shipper to commission broker to dealer to purchaser. The purpose of all of this was to establish that the traffic in livestock at the yards constituted a sort of closed circuit, and not a mere series of pointson a long line.
Naturally, this was not a question of purely academic concern. If Stafford'scounsel could show that the activities of the stockyards were not part of interstate commerce, but were purely intrastate in nature, it would place thoseactivities beyond the purview of Congress and its Packers and Stockyards Actof 1921. If, on the other hand, the stockyards fell under the authority of the legislative branch, the latter could enforce antitrust laws. For some two decades prior to the 1922 case, as Justice Taft stated in his opinion for themajority, the meat-packing industry had been dominated by five companies: Swift, Armour, Cudahy, Wilson, and Morris. These "Big Five," it appeared to thefederal government, were engaged in a conspiracy to control the costs of livestock, and in 1903, the government had filed a bill in equity to force them to desist from the alleged conspiracy.
Taking on the Monopolies
Swift appealed an injunction under the bill, and the case went before the Supreme Court in 1905 as Swift v. United States. The Court sustained theinjunction, with a unanimous opinion written by Justice Holmes: "Although thecombination alleged embraces restraint and monopoly of trade within a singlestate," Holmes wrote, "its effect upon commerce among the States is not accidental, secondary, remote, or merely probable." He then went on to deign the"stream of commerce" doctrine thus:
Seven years later, in 1912, Swift was again indicted for violation of anti-trust laws, and acquitted. A 1917 Federal Trade Commission (FTC) investigationfound that the packers of the "Big Five" did indeed have a conspiracy in operation, whereby they controlled all aspects of the facilities through which livestock were sold. A bill in equity filed in 1920 with the Supreme Court of the District of Columbia illustrated the effects of this control through tactics such as "wiring on." Under the latter scheme, an unsuspecting shipper might take his stock to one yard and, not being pleased with the price offered, might take it to another yard--not knowing that the two yards were in collusion. Once he got to the second yard, he would find the price offered was the same as at the first, with his profit further reduced by the loss incurred in his shipping of the livestock to the second yard. Such factors influenced thepassing of the Packers and Stockyards Act of 1921, a law aimed at preventingsuch unfair practices. With Stafford v. Wallace, and the associated case of Burton v. Clyne, the act came under challenge.
Writing for a 7-1 majority (Justice Day took no part in the proceedings), Chief Justice Taft began by clarifying the issue in question. The case had cometo the Court's attention not so that it could decide who was right--Staffordand Company on the one hand, the FTC and Congress on the other--about specific violations of antitrust law; but rather to determine whether Congress had authority to pass, and the government to enforce, the Packers and Stockyards Act of 1921. Under the latter, stockyards were defined, as were stockyard owners, commission people, and dealers, and the dealers were required to registerwith the state. The secretary of agriculture (who at that time was Henry C.Wallace) had power to make rules, prescribe the means by which the differententities had to keep their accounts, and to fix rates. All of this was established, Taft indicated, for the purpose of ensuring a steady "stream of commerce":
"The chief evil" whose fear instigated the passage of the bill, Taft wrote, was the collusion of packers, commission people, and dealers who in some combination could affect prices to their benefit--and to the harm of the people who raised the cattle, not to mention the consumer. Given the monopolies at work in the stockyard, there was a situation "full of opportunity and temptation, to the prejudice of the absent shipper and owner."
Defining and Expanding the Concept
The stockyards, Taft stated, "are not a place of rest or final destination" in interstate commerce; rather, they are "but a throat through which the current flows, and the transactions which occur there are only incident to this current from the West to the East, and from one state to another." The sale ofstock within a yard could not therefore be
The stockyards act, therefore, treated the yards as "great national public utilities to promote the flow of commerce from the ranges and farms of the Westto the consumers in the East." As to whether the yards should be under federal jurisdiction, that question had been decided in Munn v. Illinois (1877). Similarly, United States v. Union Stock Yards Co. (1912) established the yards as an agency of interstate commerce inasmuch as they receivedlivestock by rail. At issue in Stafford, then, was the highly focusedquestion of "whether the business done in the stockyards, between the receiptof the live stock in the yards and the shipment of them therefrom, is a partof interstate commerce." To make that determination required a closer look at the 1905 Swift case.
After reviewing the bill in equity brought in 1905 "against substantially thesame packing firms as those against whom this legislation is directed," theCourt upheld the bill. Justice Holmes wrote for the majority, "the scheme asa whole seems to us to be within reach of the law." As for the monopoly allegedly engaged in by Swift, it was surely interstate in character: "Although the combination alleged embraces restraint and monopoly of trade within a single state, its effect upon commerce among the states is not accidental, secondary, remote, or merely probable." In the final analysis, "commerce among the states is not a technical legal conception, but a practical one, drawn from the course of business." Given this solid practical understanding, Taft wrote,the Court refused to involve itself in an "inquiry into the noninterstate character of . . . incidents and facilities" that constituted part of an interstate transaction, and which "when considered alone and without reference" to other elements could appear to be outside interstate commerce.
The next year, in 1923, Taft reiterated his admiration for the Swift ruling with a decision in which he said that the earlier case "was a milestonein the interpretation of the commerce clause of the Constitution." Meanwhile, in Stafford he wrote that "the principles of the Swift Case have become a fixed rule of this Court in the construction and application of the commerce clause." As an example he cited the Court's ruling in Lemke v. Farmer's Grain Co. earlier in 1922, a challenge involving the sale of wheat from North Dakota granaries to Minnesota merchants.
Taft devoted the remainder of his opinion to closing up any further areas ofcontention on the part of Stafford. Hence, he noted that the ruling inquestion was not a bill in equity, as it had been in Swift, or a conspiracy indictment, but a law passed by Congress, and Taft stated that"this Court [would] certainly not substitute its judgment for that of Congress in such a matter unless the relation of the subject to interstate commerceand its effect upon it [were] clearly nonexistent." He made special note of Hopkins v. United States and Anderson v. United States, two related 1898 cases involving commission merchants and stockyards, as well as several others which might have seemed to bear on Stafford, but did not. Therefore, he affirmed the orders of the district court, an opinion to which Justice McReynolds dissented without filing a written opinion.
Impact
Coming as it did after years during which the Court had often supported the powers of the states and corporations against that of the federal government,Stafford marked a growing emphasis on federal authority in commerce. This trend continued in the 1930s under President Franklin D. Roosevelt, in spite of two rulings that struck down his National Industrial Recovery Act (NIRA) and Agricultural Adjustment Act (AAA). In the 1960s, with Heart of Atlanta Motel v. United States (1964), the federal government would use control over interstate commerce to enforce civil rights law, by ruling that Congress could use is commerce power to prevent interstate commerce by companies that discriminate on the basis of race. United States v. Lopez (1995),on the other hand, would show that congressional commerce power had its limits, when it was determined that a ban on handguns in public schools could notbe justified under the commerce clause.
Related Cases
Stafford and Company, a firm engaged in the buying and selling of livestock
Respondent
Henry C. Wallace, U.S. Secretary of Agriculture
Petitioner's Claim
That the operation of stockyards did not constitute interstate commerce, andtherefore Congress did not have authority under the commerce clause of the U.S. Constitution to enforce the Packers and Stockyards Act of 1921.
Chief Lawyer for Petitioner
E. Godman
Chief Lawyer for Respondent
James Montgomery Beck, U.S. Solicitor General
Justices for the Court
Louis D. Brandeis, John Hessin Clarke, Oliver Wendell Holmes, Joseph McKenna,Mahlon Pitney, William Howard Taft (writing for the Court), Willis Van Devanter
Justices Dissenting
James Clark McReynolds (William Rufus Day did not participate)
Place
Washington, D.C.
Date of Decision
1 May 1922
Decision
Upheld the authority of Congress to enforce the act over stockyards, which the Court ruled were not "places of rest or a final destination," but rather "athroat through which the current of commerce flows."
Significance
Stafford v. Wallace marked a milestone in the Court's interpretation of the powers granted to Congress under Article I, Section 8 of the U.S. Constitution. Specifically, Stafford expanded the "stream of commerce" doctrine introduced by Justice Holmes in Swift and Co. v. United States (1905). With Stafford, the Court determined that Congress had the further power to curb monopolistic business practices in intrastate industries thatbelonged to a stream of interstate commerce. As such, the case helped signalthe Court's trend in the first half of the twentieth century toward an interpretation of interstate commerce favorable to the powers of the government.
Stockyards in the Stream of Commerce
In the early 1900s, the stockyards of Chicago, along with the steel mills ofPittsburgh and the financial markets of New York City, seemed to be a symbolof American economic power. Not surprisingly, perhaps, writer Upton Sinclairhad set his controversial novel The Jungle (1906), which exposed corruption and brutality in business, in the stockyards of Chicago. Through the facilities of companies such as the Union Stockyards & Transit Company, which was incorporated under Illinois law in 1865, passed some 15 million cattle, calves, hogs, and sheep in 1920. This made the stockyards of Chicago the largest in the world. And as the Supreme Court was to discover, some five companies held virtual control over the operations of the Union and other stockyards in the great Chicago livestock center.
When Stafford v. Wallace went before the Supreme Court, Chief JusticeTaft went to great lengths in order to establish the extent to which the Chicago stockyards constituted a single point, by no means a terminal one, alonga vast stream of interstate commerce. From their point of origin in diverse livestock-raising locales, cattle from Wyoming, sheep from Montana, and hogs from Kansas (to use a few likely examples) would be shipped by farmers to a commission merchant at the Chicago stockyards, with whom the farmer had an agreement to sell the livestock on consignment. Thus the commission merchant didnot pay for the livestock; he simply arranged their sale and would take a portion of the profits. Upon receiving the live animals, he would have them driven from the cars to assigned pens, where they would be watered and fed.
In the bill submitted by Stafford's lawyer, E. Godman, to the Supreme Court in Stafford v. Wallace, the petitioner would attempt to establish thatthis constituted the completion of the transportation of the livestock. Through Godman, Stafford would further assert that livestock consigned to commission merchants were sold by them for a commission, and not "on their own account" as owners; that sales took place only at the stockyard and nowhere else; that such commissions were fixed at a certain price per head; and that the commission merchants simply passed the payment along to the original owners andshippers, minus their own commissions and other expenses. Stafford's counselpresented a number of other claims, all of them intending to show that shipment through the stockyards did not constitute a continuous flow of commercialactivity, but rather that there was a series of transactions starting and stopping, from farmer to shipper to commission broker to dealer to purchaser. The purpose of all of this was to establish that the traffic in livestock at the yards constituted a sort of closed circuit, and not a mere series of pointson a long line.
Naturally, this was not a question of purely academic concern. If Stafford'scounsel could show that the activities of the stockyards were not part of interstate commerce, but were purely intrastate in nature, it would place thoseactivities beyond the purview of Congress and its Packers and Stockyards Actof 1921. If, on the other hand, the stockyards fell under the authority of the legislative branch, the latter could enforce antitrust laws. For some two decades prior to the 1922 case, as Justice Taft stated in his opinion for themajority, the meat-packing industry had been dominated by five companies: Swift, Armour, Cudahy, Wilson, and Morris. These "Big Five," it appeared to thefederal government, were engaged in a conspiracy to control the costs of livestock, and in 1903, the government had filed a bill in equity to force them to desist from the alleged conspiracy.
Taking on the Monopolies
Swift appealed an injunction under the bill, and the case went before the Supreme Court in 1905 as Swift v. United States. The Court sustained theinjunction, with a unanimous opinion written by Justice Holmes: "Although thecombination alleged embraces restraint and monopoly of trade within a singlestate," Holmes wrote, "its effect upon commerce among the States is not accidental, secondary, remote, or merely probable." He then went on to deign the"stream of commerce" doctrine thus:
When cattle are sent for salefrom a place in one state, with the expectation that they will end their transit, after purchase, in another, and when in effect they do so, with only the interruption necessary to find a purchaser at the stock yards, and when this is a typical constantly recurring course, the current thus existing is a current of commerce among the states, and the purchase of the cattle is a partand incident of such commerce.
Seven years later, in 1912, Swift was again indicted for violation of anti-trust laws, and acquitted. A 1917 Federal Trade Commission (FTC) investigationfound that the packers of the "Big Five" did indeed have a conspiracy in operation, whereby they controlled all aspects of the facilities through which livestock were sold. A bill in equity filed in 1920 with the Supreme Court of the District of Columbia illustrated the effects of this control through tactics such as "wiring on." Under the latter scheme, an unsuspecting shipper might take his stock to one yard and, not being pleased with the price offered, might take it to another yard--not knowing that the two yards were in collusion. Once he got to the second yard, he would find the price offered was the same as at the first, with his profit further reduced by the loss incurred in his shipping of the livestock to the second yard. Such factors influenced thepassing of the Packers and Stockyards Act of 1921, a law aimed at preventingsuch unfair practices. With Stafford v. Wallace, and the associated case of Burton v. Clyne, the act came under challenge.
Writing for a 7-1 majority (Justice Day took no part in the proceedings), Chief Justice Taft began by clarifying the issue in question. The case had cometo the Court's attention not so that it could decide who was right--Staffordand Company on the one hand, the FTC and Congress on the other--about specific violations of antitrust law; but rather to determine whether Congress had authority to pass, and the government to enforce, the Packers and Stockyards Act of 1921. Under the latter, stockyards were defined, as were stockyard owners, commission people, and dealers, and the dealers were required to registerwith the state. The secretary of agriculture (who at that time was Henry C.Wallace) had power to make rules, prescribe the means by which the differententities had to keep their accounts, and to fix rates. All of this was established, Taft indicated, for the purpose of ensuring a steady "stream of commerce":
The object to be secured by the act is the free and unburdened flow of live stock from the ranges and farms of the West and the Southwestthrough the great stockyards and slaughtering centers on the borders of thatregion, and thence in the form of meat products to the consuming cities of the country in the Middle West and East, or, still, as live stock, to the feeding places and fattening farms in the Middle West or East for further preparation in the market.
"The chief evil" whose fear instigated the passage of the bill, Taft wrote, was the collusion of packers, commission people, and dealers who in some combination could affect prices to their benefit--and to the harm of the people who raised the cattle, not to mention the consumer. Given the monopolies at work in the stockyard, there was a situation "full of opportunity and temptation, to the prejudice of the absent shipper and owner."
Defining and Expanding the Concept
The stockyards, Taft stated, "are not a place of rest or final destination" in interstate commerce; rather, they are "but a throat through which the current flows, and the transactions which occur there are only incident to this current from the West to the East, and from one state to another." The sale ofstock within a yard could not therefore be
merely local transactions. They create a local change of title, it is true, but they do not stop the flow; they merely change the private interests in the subject of the current, not interfering with, but, on the contrary, being indispensable to, its continuity.
The stockyards act, therefore, treated the yards as "great national public utilities to promote the flow of commerce from the ranges and farms of the Westto the consumers in the East." As to whether the yards should be under federal jurisdiction, that question had been decided in Munn v. Illinois (1877). Similarly, United States v. Union Stock Yards Co. (1912) established the yards as an agency of interstate commerce inasmuch as they receivedlivestock by rail. At issue in Stafford, then, was the highly focusedquestion of "whether the business done in the stockyards, between the receiptof the live stock in the yards and the shipment of them therefrom, is a partof interstate commerce." To make that determination required a closer look at the 1905 Swift case.
After reviewing the bill in equity brought in 1905 "against substantially thesame packing firms as those against whom this legislation is directed," theCourt upheld the bill. Justice Holmes wrote for the majority, "the scheme asa whole seems to us to be within reach of the law." As for the monopoly allegedly engaged in by Swift, it was surely interstate in character: "Although the combination alleged embraces restraint and monopoly of trade within a single state, its effect upon commerce among the states is not accidental, secondary, remote, or merely probable." In the final analysis, "commerce among the states is not a technical legal conception, but a practical one, drawn from the course of business." Given this solid practical understanding, Taft wrote,the Court refused to involve itself in an "inquiry into the noninterstate character of . . . incidents and facilities" that constituted part of an interstate transaction, and which "when considered alone and without reference" to other elements could appear to be outside interstate commerce.
The next year, in 1923, Taft reiterated his admiration for the Swift ruling with a decision in which he said that the earlier case "was a milestonein the interpretation of the commerce clause of the Constitution." Meanwhile, in Stafford he wrote that "the principles of the Swift Case have become a fixed rule of this Court in the construction and application of the commerce clause." As an example he cited the Court's ruling in Lemke v. Farmer's Grain Co. earlier in 1922, a challenge involving the sale of wheat from North Dakota granaries to Minnesota merchants.
Taft devoted the remainder of his opinion to closing up any further areas ofcontention on the part of Stafford. Hence, he noted that the ruling inquestion was not a bill in equity, as it had been in Swift, or a conspiracy indictment, but a law passed by Congress, and Taft stated that"this Court [would] certainly not substitute its judgment for that of Congress in such a matter unless the relation of the subject to interstate commerceand its effect upon it [were] clearly nonexistent." He made special note of Hopkins v. United States and Anderson v. United States, two related 1898 cases involving commission merchants and stockyards, as well as several others which might have seemed to bear on Stafford, but did not. Therefore, he affirmed the orders of the district court, an opinion to which Justice McReynolds dissented without filing a written opinion.
Impact
Coming as it did after years during which the Court had often supported the powers of the states and corporations against that of the federal government,Stafford marked a growing emphasis on federal authority in commerce. This trend continued in the 1930s under President Franklin D. Roosevelt, in spite of two rulings that struck down his National Industrial Recovery Act (NIRA) and Agricultural Adjustment Act (AAA). In the 1960s, with Heart of Atlanta Motel v. United States (1964), the federal government would use control over interstate commerce to enforce civil rights law, by ruling that Congress could use is commerce power to prevent interstate commerce by companies that discriminate on the basis of race. United States v. Lopez (1995),on the other hand, would show that congressional commerce power had its limits, when it was determined that a ban on handguns in public schools could notbe justified under the commerce clause.
Related Cases
- Munn v. Illinois, 94 U.S. 113 (1877).
- Anderson v. United States, 171 U.S. 604 (1898).
- Hopkins v. United States, 171 U.S. 604 (1898).
- Swift and Co. v. United States, 196 U.S. 375 (1905).
- United States v. Union Stock Yards, 226 U.S. 286 (1912).
- Lemke v. Farmers' Grain Co., 258 U.S. 50 (1922).
- Heart of Atlanta Motel v. United States, 379 U.S. 421 (1964).
- United States v. Lopez, 514 U.S. 549 (1995).
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