Black Monday: 90 Years Later

The President versus the Court

The New Digest is delighted to present a guest essay by Paul D. Cupp. Mr. Cupp is a J.D. student at the Antonin Scalia Law School at George Mason University.

While not as disgraceful as the attack on Pearl Harbor, “Black Monday” is the other date from Roosevelt’s presidency that should forever “live in infamy.” May 27, 1935 is appropriately called “Black Monday” since the decisions handed out by the Supreme Court that day represent a short compendium of the pathologies our jurisprudence has fallen into — a microcosm of our present ills. Three cases were decided that fateful day, each representing an instance of judicial overreach and an obstacle strewn in the path of governance for the common good.

The Supreme Court announced the three decisions in order of magnitude, each one striking down an order or statute from President Roosevelt’s First New Deal. In fact, Black Monday is the reason we can even speak of a First New Deal as opposed to a Second New Deal, since the Black Monday decisions prompted a rewriting of entire policy schemes that Roosevelt’s administration, together with Congress, had mutually enacted. Below I recap the three cases and the heavy yoke they’ve imposed on our capacity to govern.

Humphrey’s Executor v. United States

The first decision announced was Humphrey’s Executor v. United States, a case that is back in recent headlines due to President Trump’s challenging the precedent. Readers of the New Digest likely know the facts of this case, so these are only the bare bones. In August 1933, a few months after Roosevelt had assumed office, the President asked FTC commissioner William E. Humphrey for his resignation, citing their differences in policy as an impediment to the President’s priorities. The commissioner refused to resign despite the President’s continued insistence, leaving Roosevelt with only one choice. In October 1933 the President sent a final letter to the commissioner notifying him of his termination. Humphreys died before taking the case to court, but his executor brought it on his behalf to recover lost wages.

The problem with Roosevelt’s firing of Humphrey is that the statute establishing the FTC only allowed for commissioners to be fired in the case of “"inefficiency, neglect of duty, or malfeasance in office." In other words, Roosevelt couldn’t fire Humphrey without good cause. To justify their decision in light of Article II of the Constitution, which vests all executive power and the privilege of choosing officers in the President, the Court devised a novel theory of independent agencies as being outside the executive branch. In the Court’s reasoning, independent agencies exercise only “quasi-legislative” and “quasi-judicial” powers, not executive power, and this distinction removes them from direct accountability to the President.¹ This confused distinction is rooted in the progressive-era belief that administration of government can and should be sealed off from politics.

No intelligent person doubts the salutary effects of expertise in the administration of government. But to posit such a strong bifurcation between politics and administration is to ignore the intrinsically human aspect of governing, which inevitably requires the exercise of human will and prudential judgment to steer the ship of state through the turbulence of changing circumstances. That prudential judgment and exercise of will belongs to the President. To separate governmental administration from his prerogatives is to deny the classical view embodied by Article II, which assumes that the President’s public and legal body “subsumes the whole executive establishment, including each and every agency or official exercising executive power.”

The confused logic and novel categories propounded in Humphrey’s persist to this day, but perhaps not for long. The Supreme Court has just stayed an injunction that would have prevented President Trump from removing commissioners at the NLRB and MSPB, who enjoy the same (unconstitutional) removal protections as those of the FTC. In its order, the Court noted that “[t]he stay reflects our judgment that the Government is likely to show that both the NLRB and MSPB exercise considerable executive power”, which means they don’t fall into the “quasi-legislative” and “quasi-judicial” categories that Humphrey’s carved out exceptions for. The Court has elsewhere indicated its willingness to reexamine the shaky constitutional foundations of Humphrey’s, while public calls to reassert Presidential control over the administrative state have only grown louder. Mercifully, this ill-begotten precedent appears to be on its death bed.

Louisville Joint Stock Land Bank v. Radford

The second decision the Court read out was Louisville Joint Stock Land Bank v. Radford, which struck down the Frazier-Lemke Act. Frazier-Lemke was designed to address the tidal wave of farm foreclosures that swept across the country in the 1930s. Crop prices collapsed during the Great Depression, as both domestic and international demand withered in the face of economic turmoil. Many small farmers defaulted on their loans, leading to their farms being auctioned off during bankruptcy proceedings. The country was at risk of having its rural agricultural sector consolidated into a few hands, as financiers and speculators bought up land for pennies on the dollar. Frazier-Lemke reformed federal bankruptcy law to open more avenues for farmers to keep their farms and gain more time to compensate their creditors. It did this by forcing farmers and their creditors to the negotiating table, and when negotiations failed, it provided a five year window for farmers to pay back their mortgage while avoiding foreclosure.

In an opinion that seemed out of character, Justice Louis Brandeis sided with the bankers, claiming that Frazier-Lemke violated the Fifth Amendment since it took away “property rights” from the creditors without just compensation. The property rights in question here referred to the entitlement that creditors had to the full dollar amount specified in the mortgage contract. Ignoring that Congress retains its power to abridge private contracts where the common good requires, such as in situations where the farming class is at risk of being swallowed whole by the moneyed class, Brandeis roped in the Fifth Amendment to assert the absolute inviolability of subjective rights over objective right. The decision in Louisville Joint Stock Land Bank was a variation of Lochner era jurisprudence, which embraced a form of legal libertarianism that views private rights as a bulwark against the ominous state. This is in contrast to the classical legal tradition which views private rights as always and everywhere ordered to the common good, and not as absolute powers residing in the individual to strike down reasonable statutes that have been duly enacted by a legitimate authority.

The sovereign prerogative to cancel debts and restructure usurious contracts has been omnipresent throughout global legal history, from Hammurabi’s “clean slate” jubilees to Solon’s “shaking off of the burdens” at Athens. It is a prerogative that properly belongs within the sovereign’s power given how often the tension between financial interests and the working class clash. Crushing debt and unwillingness to reform have doomed prevailing regimes from time immemorial, not the least of which was the Roman Republic. By embracing the liberal view of property rights as absolute trump cards against the state, Justice Brandeis and the Court made sure this salutary power of sovereign debt cancellation remained dormant.

A.L.A. Schechter Poultry Corp. v. United States

Schechter Poultry was the last decision read out on Black Monday, and perhaps the most unfortunate. In a unanimous vote the Court struck down Roosevelt’s National Industrial Recovery Act (NIRA), which sought to implement the corporatist system of economic regulation promoted by Pope Pius XI in his magisterial encyclical Quadragesimo Anno. NIRA aimed at reorganizing the flailing American economy by drawing together workers and capitalists into trade associations. The idea was to source regulation from the “ground up”, meaning that trade associations with representatives from both labor and capital would negotiate the rules by which their industries would operate. This would result in the promulgation of industry codes that included labor agreements, fair competition standards, and quality control requirements.

The moral framework that inspired this system was elaborated by Pius XI, who believed that cooperation between classes would alleviate the effects of unfettered competition that often drove them apart. NIRA also envisioned a strong role for the President in administering the statute, as he would have the final say in promulgating the codes that trade associations proposed, assuring that they were written with the common good in mind. But alas, the establishment of the cooperative framework envisioned by NIRA was smothered in the cradle on account of the statute’s violation of the nondelegation doctrine. The Court was concerned that NIRA gave the President too much discretion in promulgating the proposed codes. To this day, NIRA is the only statute in Supreme Court history to be struck down under the nondelegation doctrine.

The Schechter Poultry decision was a premature cancellation of a useful experiment in “democracy without voting.”² Today the concept of democracy has been watered down to mean nothing more than the right to cast a vote. But it has historically meant much more than that. It also means self-government in a robust sense that includes actual involvement in the making of laws. Throughout the European townships of the Middle Ages, members of the local guilds didn’t normally possess voting rights in the King’s council, but they did have a say in regulating the circumstances that touched most closely on their daily lives, namely, their work. This produced an enduring economic framework that served as a pillar of Western culture, and this same commitment to robust democracy inspired the corporatist framework elaborated by Quadragesimo Anno and embodied in NIRA. The fortunate part is that if Congress ever passed similar legislation, it would have a much better chance at standing than in 1935, given the broad delegations of power that the executive branch is granted today.

Conclusion

After the Supreme Court wrapped up its work that day, Justice Brandeis retreated to his chambers. Once there he summoned Roosevelt’s aide, Tommy Corcoran, to convey a message to the President: “This is the end of this business of centralization, and I want you to go back and tell the president that we're not going to let this government centralize everything.”³ While the opinions read by the Supreme Court were presumed to have come from neutral referees, it’s hard to square that with Brandeis’s postgame behavior. Regardless of whether the “centralization” accusation is true, which I think is precisely the opposite of the case, at least with regard to NIRA, it’s clear that a certain desire to put Roosevelt in his place was hovering over the Court. By setting themselves up as protectors of the rule of law, or what was really just their conception of it, the Supreme Court imposed their own political preferences in place of Congress and the President’s prudential judgments, which they alone were legitimately charged to make. Black Monday should be a case study in the follies of judicial overreach, a lesson which many judges would be well-advised to learn today.

1. Humphrey’s Executor v. United States, 295 U.S. 602 (1935), at 624, 628-29.

2. Adrian Vermeule, Common Good Constitutionalism 48 (Polity Books 2022).

3. Jeffrey Rosen, Louis Brandeis: American Prophet 2 (2016).