Carter v. Carter Coal Co.

Carter v. Carter Coal Co., 298 U.S. 238 (1936).

Facts: Carter was president and stockholder of Carter Coal Co. Carter sued to enjoin the Company from paying a tax assessed against it under the Bituminous Coal Conservation Act, which sought to regulate hours and wages in coal mines and imposed a tax on the sales price of fair market value of all coal mined by any producer that did not comply with the regulations. The US conceded that the tax was a penalty and that its validity depended on whether its regulatory aspects were within the federal commerce power. The district court held for the Co. and Carter appealed.

Issue: May Congress regulate the hours, wages, and other employment conditions of a national industry?

Holding: No.

• Manufacture/Commerce Distinction: "Commerce" has been defined as "intercourse for the purposes of trade." The employment of men and the fixing of their wages, hours of labor, and working conditions constitute intercourse for purposes of production, not of trade. The local chapter of mining, manufacturing, or farming does not change merely because the products of those move into interstate commerce. The relations between employer and employee are local in nature and subject only to local regulation.
• The production of every commodity intended for interstate sale and transportation has some effect upon interstate commerce. However, activities relating to production have only an indirect effect on commerce. The distinction between direct and indirect effects turns not upon the magnitude of either the cause or the effect, but entirely upon the manner in which the effect has been brought about. Congress can regulate only those things that have a direct effect on commerce. Mining is not one of them.
• The evils created are local so Congress may not regulate them.

Judgment: Reversed.

Dissent (Cardozo): Mining, agriculture, and manufacture are not interstate commerce if considered by themselves, yet their relation to interstate commerce may be such that for the protection of the one there is need to regulate the other. This language of direct/indirect relation to commerce has not been literally applied in past cases. The proximity or remoteness of activities to commerce is a more logical way to approach the subject.

Note: This case illustrates the Court's movement, just prior to 1936, away from a geographic analysis to a direct/indirect analysis. Under this analysis, an activity that takes place entirely within a singe state may be regulated by Congress if it has a direct effect on interstate commerce. This approach faded after 1936 as the Court broadened its view of the congressional commerce power (categorical distinctions disappear).