Carter v. Carter Coal Co. – Case Brief Summary
Summary of Carter v. Carter Coal Co., 298 U.S. 238, 56 S. Ct. 855, 80 L. Ed. 1160 (1936).
In an effort to stabilize the coal industry during the Great Depression, Congress enacted the Bituminous Coal Conservation Act of 1935. The Act established regulatory bodies for the coal industry and provided for setting minimum and maximum prices and the regulation of labor practices.
The Act imposed a 15 percent excise tax on all coal produced. While compliance with the provisions of section 4 of the Act was not mandatory, the tax was reduced by 90 percent for coal producers complying with the Act.
Carter (P), a stockholder in Carter Coal Company (D), brought a stockholder’s suit against the company to enjoin it from accepting the terms of the Act and from paying the tax. Carter’s complaint also named the Commissioner of Internal Revenue as a defendant and sought to enjoin enforcement of the Act.
The Supreme Court of the District of Columbia made the following findings:
- the production of bituminous coal is a local activity carried on within state borders
- most coal is shipped outside the state in which it is produced, and distribution and marketing are primarily interstate in character
- the intrastate distribution and sale of coal are so connected that interstate regulation cannot be accomplished effectively without regulation of transactions of intrastate distribution and sale
- coal is the nation’s greatest and primary source of energy, vital to the public welfare, of the utmost importance to the industrial and economic life of the nation and the health and comfort of its inhabitants
- the distribution of coal in interstate commerce should be regular, continuous, and free of interruptions, obstructions, burdens, and restraints
- there existed a condition of unrestrained and destructive competition in coal distribution and marketing and destructive price-cutting, burdening interstate commerce and obstructing its normal flow.
The court held that the labor provisions of the Act were unconstitutional but the price-fixing and taxing provisions were valid and constitutional. The court held that the plaintiff was not entitled to the relief sought and dismissed the lawsuit. Carter appealed and the United States Supreme Court heard the case directly without requiring that it first be heard by the Court of Appeals for the District of Columbia.
- Are the tax provisions under the Act a constitutional exercise of the taxing power?
- Are the provisions of the Act regarding collective bargaining, the control of wages, hours, and working conditions of coal miners within the authority of Congress?
Holding and Rule (Sutherland)
- No. The tax imposed by the Act is not a tax, but a penalty to coerce submission, and cannot be upheld as an expression of the taxing power.
- No. The provisions of the Act regarding collective bargaining, the control of wages, hours, and working conditions of coal miners are not within the authority of Congress and are therefore unconstitutional.
The provisions of the Act related to labor are beyond the powers of Congress, because:
- the Constitution grants to Congress no general power to regulate for the promotion of the general welfare
- the power expressly granted Congress under the Commerce Clause to regulate interstate commerce does not include the power to control the conditions in which coal is produced before it becomes an article of commerce
- the effect of labor conditions in the production of coal on interstate commerce, including disputes and strikes over wages, is an indirect effect
The provisions of the Act which seek to authorize a group of coal producers and miners to fix hours for the entire industry, and to fix minimum wages in their respective districts, are a clear violation of the Fifth Amendment.
The price-fixing provisions are not separable from the provisions concerning labor and therefore cannot stand independently. They are so related to and dependent upon the labor provisions that is it very likely that the price fixing provisions would not have passed independent of the labor provisions. The constitutionality of the price-fixing provisions is therefore not considered.
The power of the federal government does not extend to all purposes affecting the nation that the states are incapable of dealing with adequately. The authority of Congress under the Constitution is not aggregated, but enumerated. Whatever authority that is not embraced by that enumeration remains vested in the states. The federal government possesses no inherent power over the internal affairs of the states.
The term “commerce” is the equivalent of intercourse for the purposes of trade and includes transportation, purchase, sale and exchange of commodities. The power to regulate commerce includes the instrumentalities of transportation. Commerce does not include the production and manufacture of commodities, even when done with intent to sell or transport them out of state.
Production is not commerce, but a step in preparation for commerce. Production of goods and subsequent transport in interstate commerce involves two distinct and separate activities. Production and manufacture are purely local activities and are subject to state regulation. Transport out of state is interstate commerce and may be regulated only by the federal government.
Affirmed in part and reversed in part. All of the provisions of the Act at issue in this case were held unconstitutional.