1940: Law And Legislation

Congressional Legislation.

Congressional legislation in the United States during 1940 was shaped in the main by events in Europe. With each new conquest the Nazi menace came nearer to its shores. It was necessary to mobilize the man power and the resources of the country to meet this threat to its security. Congress responded with a series of the most drastic and far reaching defense measures in our peace-time history.

Selective Service Act.

The mobilization of the nation's man power to meet the emergency was begun by the Joint Resolution to Strengthen the Common Defense, which authorized the President to call into active military service for twelve months any units of the Army Reserve, the National Guard or the retired personnel of the Army which he felt to be necessary for the strengthening of the national defense. To replace the military vacuum in the states caused by the induction of the National Guard into Federal Service, Congress provided that 'home guards' units may be organized by the various states 'while any part of the National Guard is in active Federal service.' This was followed by the Selective Training and Service Act, which provided for the first peace-time conscription of man power for military service in United States history. Under this Act every male citizen between the ages of 21 and 36 and male alien of the same ages who has declared his intention of becoming a citizen was required to register and was declared liable to 'training and service in the land or naval forces of the United States.' The Act limited the number of men who could be inducted into military service at any one time to 900,000, except in time of war. Training and service is to continue for one year unless Congress declares the national interests to be imperiled in which case the President can extend the period of training and service. Following the year's training the conscripts are to be transferred to the reserve components of their services for a ten-year period or until they attain the age of 45, whichever happens first.

The Act excepts certain classes of men from its provisions, such as men who had already served three years in the army and provides that college and university students can defer their service till July 1, 1941. 'Conscientious objectors' to military service were not to be subjected to 'combatant training and service,' but were to be assigned to noncombatant services or to 'work of national importance under civilian direction.' The Act attempts to safeguard the jobs of inducted men by providing that employers must restore drafted men to their jobs or to positions 'of like seniority status and pay' unless the employers circumstances have so changed as to make it impossible or unreasonable to do so. The rights of soldiers and sailors are safeguarded further by the Soldiers and Sailors Civil Relief Act of 1940, which provided protection to men in military service against judgments, evictions of dependents for nonpayment of rent, loss of property due to nonpayment of taxes, assessments, installments, etc., and lapse of insurance policies because of nonpayment of premiums.

The mobilization of man power was only one step in the program of national defense worked out by Congress. Materials, weapons, equipment must be provided for these men. The industrial resources of the country had to be put into motion to supply the tremendous number of tanks, guns, airplanes and munitions, required by methods of totalitarian warfare. Money for defense was the first essential and this was appropriated in ever increasing amounts. New taxes were enacted so that the money appropriated would be available in the treasury when needed. The Second Revenue Act of 1940, for example, has provisions for the taxation of excess corporate profits at rates varying from 25 to 50 per cent.

National Defense Acts.

A number of statutes provide for the expansion of existing plants and the creation of new facilities for the production of war materials and equipment. For example, the Act 'to expedite the strengthening of the national defense' authorizes the Secretary of War to provide for the necessary construction, rehabilitation, conversion and installation at military posts, depots, stations or other localities of plants, of buildings, facilities, utilities and appurtenances for the development, manufacture, maintenance and storage of military equipment, munitions and supplies. The new facilities may be operated by government personnel or by qualified private manufacturers. Similar powers in the creation, development and operation of plants and facilities are also given to the Secretary of the Navy. Government owned facilities may even be created at privately owned plants where necessary for the national defense. The Reconstruction Finance Corporation is authorized to make loans or purchase the stock of any corporation 'for plant construction, expansion and equipment . . . used by the corporation in the manufacture of equipment and supplies necessary to the national defense'. Private industry is further encouraged to build new plants and expand facilities for defense purposes by provisions authorizing direct governmental reimbursement of construction costs and authorizing amortization deductions to the amount of 20 per cent from tax returns to cover the cost of emergency plants.

Not only has the creation of new facilities been authorized for the production of vital war materials, Congress has also made it possible to harness the existing industrial plants to the grim task of turning out implements of war. Compliance with government orders for materials necessary to national defense is made obligatory on manufacturers. Plants of recalcitrant manufacturers may be seized and operated by the Government. As an aid in providing the necessary speed and despatch in the making of contracts and the procurement of war materials, Congress has made it possible to waive the usual provisions which regulate the letting of government contracts. Contracts may be let with or without competitive bidding or advertising 'upon a determination that the price is fair.'

Congress has also provided against a shortage of raw materials vital to the national defense. The Reconstruction Finance Corporation may make loans or purchase the stock of corporations for the purpose of procuring and storing strategical raw materials. The President is also authorized to spend $66,000,000 for this purpose. Control of the export of military equipment and munitions or machinery and tools necessary for their manufacture has been authorized and power given to the President to prohibit or curtail the export of these items.

In the interest of hemisphere defense and Anglo-American solidarity, however, the President may authorize the Secretary of War and of the Navy to manufacture or procure coast defense guns, anti-aircraft material, ammunition, war vessels, etc., for sale to any American Republic. But no military or naval weapon, ship, boat, aircraft, munitions, supplies or equipment to which the United States has title shall be transferred, exchanged, sold or otherwise disposed of 'unless the Chief of Naval Operations in the case of naval material and the Chief of Staff of the Army in the case of military material shall first certify that such material is not essential to the defense of the United States.'

A measure of Congressional determination to provide the country with adequate national defense is shown by a comparison of two navy bills approved five weeks apart. On June 14, 1940, before the full effects of the Blitzkrieg were apparent, the President approved a bill to increase the United States Navy by 167,000 tons and to provide 4,500 naval airplanes. On July 19, 1940, the President approved a bill to increase the Navy by 1,325,000 tons and authorized the acquisition and maintenance of 15,000 naval airplanes.

Internal Enemies.

While Congress was making it possible for the military, naval and air force to prepare to meet external enemies, it did not overlook the fact that aid to such enemies might come from within our borders. Steps to control Fifth Column activities are found in the Act 'to require the Registration of Certain Organizations,' and the Alien Registration Act 1940. The first Act requires various types of subversive organizations to register with the Attorney-General. Subversive organizations are those organizations which accept contributions from a foreign government (or whose policies are determined by a foreign government or a foreign political party or international political organization), which engage in 'political activity' whose purpose is to control by force or to overthrow the government of the United States; such organizations often engage in 'civilian military activity.'

The Alien Registration Act requires every alien over the age of fourteen who remains in the United States more than thirty days to register and be fingerprinted. This Act also widens the class of aliens that may be deported. In addition the Act made it a felony, punishable by imprisonment up to 10 years, for any person to knowingly or willfully advocate or teach the duty, necessity, desirability, etc., of overthrowing or destroying any government of the United States, to print or to distribute any printed matter having this end in view, or to organize or become a member of subversive groups seeking to overthrow the government of the United States by force.

A greater degree of control over aliens requires the exercise of greater care in conferring rights of citizenship upon them. Thus, Congress passed the Nationality Act of 1940, which is 'an Act to revise and codify the nationality laws of the United States into a comprehensive nationality code.' The Act grants the right to become naturalized citizens only to white persons or to persons of African nativity or descent and to descendants of races 'indigenous to the Western Hemisphere.' These persons must speak English, be 'of good moral character' and cannot believe in, advocate or teach the overthrow of the government by force, unlawful damage to property, sabotage, etc., or be members of subversive organizations. Five years' residence in the United States is required as a prerequisite of naturalization. The Commissioner of Naturalization is required to keep a registry of each person arriving in the United States after the effective date of the Act and no person can declare his intention to become a citizen 'until such person's lawful entry for permanent residence shall have been established.'

Curbs on Pernicious Political Activities.

Congress has taken cognizance of the fact that democracy may perish as a result of the corruption of the democratic process as well as through the attack of internal and external enemies. It therefore extended the scope of the Hatch Act, passed in 1939, 'to prevent pernicious political activities.' The 1940 amendments made unlawful the receipt by any person of contributions in excess of $5,000 to a campaign for an elective Federal office or the contribution or expenditure of more than $3,000,000 by any political committee during any one calendar year. The Act also made it unlawful for any state or local official whose principal employment is in connection with any activity which is financed by loans or grants made by the United States to use his official authority for the purpose of interfering with an election or a nomination for office or to coerce or advise any other employee to contribute any part of his salary for political purposes. Persons or firms entering into contracts with the United States are also prohibited from making contributions to any political party, committee or candidate for public office or to any person or for any political purpose or use during the period of negotiation or performance under the contract.

Governmental Reorganization Plans.

The reorganization of the governmental structure which was begun last year was continued in 1940 with the submission by the President of Reorganization Plans III and IV. The major feature of Plan III is the creation of a fiscal service in the Department of the Treasury in which are consolidated various bureaus and divisions of the government that have something to do with finance and fiscal control. Plan IV, among other things, authorized the transfer of the Civil Aeronautics Authority to the Department of Commerce, the transfer of the Weather Bureau from the Department of Agriculture to the Department of Commerce, the transfer of the Food and Drug Administration from the Department of Agriculture to the Federal Security Agency, and the transfer of the Immigration and Naturalization Service from the Department of Labor to the Department of Justice.

Safeguards for Investors and Consumers.

In its preoccupation with defense problems and problems of governmental reorganization, Congress did not entirely lose sight of the interests of two classes of the public, the investor and the consumer. The interests of the investors of this country are safeguarded by the Investment Company Act, which declares investment companies to be affected with a public interest and investment advisers to be 'of national concern.' The Act declares that the public interest is adversely affected when, among other things, investment companies are operated in the interest of directors, officers, brokers, etc., 'rather than in the interest of all classes of such companies' security holders.' The Act provides for a comprehensive regulation of the different types of investment companies and of investment advisers. It also requires their registration with the Securities Exchange Commission and the supervision of their activities by the Commission. The Act forbids unregistered companies or investment advisers the use of the mails or of the instrumentalities of interstate commerce.

The interest of the consumer is protected by the Wool Products Labeling Act, whose purpose is 'to protect producers, manufacturers, distributors and consumers from the unrevealed presence of substitutes and mixtures in spun, woven, knitted, felted or otherwise manufactured wool products.' The Act provides for the proper tagging and branding of wool products and makes the manufacture and distribution of misbranded wool products in interstate commerce 'an unfair method of competition and an unfair and deceptive act or practice' subject to action by the Federal Trade Commission. The latter is charged with the general enforcement of the Act. (See also UNITED STATES: Seventy-sixth Congress.)

Supreme Court Decisions.

Civil Rights Cases.

The Supreme Court's decisions in 1940 showed clearly that the Court is still fulfilling its traditional role of guardian of individual rights guaranteed by the Constitution. In Cantwell v. Connecticut, the Court declared unconstitutional a Connecticut statute which prohibited the solicitation of money for religious or charitable purposes 'unless such cause shall have been approved by the Secretary of the Public Welfare Council.' The Court stated that the 'general regulation in the public interest of solicitation which does not involve any religious test. . . . is not open to any constitutional objection.' However, the statute in this case permitted 'a censorship of religion' since the Secretary of the Public Welfare Council could withhold his approval of solicitation if he determined that the cause is not a religious one. Such a censorship of religion is a denial of the exercise of religious liberty protected by the Constitution. The Court also ordered the conviction of the defendant for inciting a breach of the peace to be set aside. In the presence of two men who were Catholics, he had played a phonograph record which contained attacks upon religion in general and the Catholic Church in particular. The Court stated in the course of its opinion: 'In the realm of religious faith, and in that of political belief, sharp differences arise. In both fields the tenets of one man may seem the rankest error to his neighbor. To persuade others to his own point of view, the pleader, as we know, at times, resorts to exaggeration, to vilification of men who have been, or are, prominent in church or state, and even to false statement. But the people of this nation have ordained in the light of history, that, in spite of the probability of excesses and abuses, these liberties are, in the long view, essential to enlightened opinion and right conduct on the part of the citizens of a democracy.'

Constitutional guarantees of freedom of speech were successfully invoked in two cases, Thornhill v. Alabama and Carlson v. California, in which the State of Alabama and a California County sought to prohibit peaceful picketing. These prohibitions were declared invalid by the Court. 'In the circumstances of our time,' stated the Court, in the Thornhill case, 'the dissemination of information concerning the facts of a labor dispute must be regarded as within that area of free discussion that is guaranteed by the Constitution.' The Court was not impressed with the argument that it was necessary to prohibit peaceful picketing because of the dangers of breaches of the peace. 'No clear and present danger of destruction of life or property or invasion of the right of privacy or breach of the peace can be thought to be inherent in the activities of every person who approaches the premises of an employer and publicizes the facts of a labor dispute involving the latter.'

The Supreme Court severely condemned two convictions in criminal cases obtained through the use of third degree methods: Chambers v. Florida; White v. Texas. In the latter case, the defendant, an illiterate farm hand, was convicted of rape and sentenced to death. The conviction was obtained largely upon the basis of a confession obtained as the result of the defendant's being whipped on several nights, when he was taken out of jail. 'Due process of law,' stated the Court in reversing this conviction, 'commands that no such practice as that disclosed by this record shall send any accused to his death.' In the Chambers' case the Court stated that it was not impressed by the argument that third degree methods are necessary to uphold our laws. 'The Constitution proscribes such lawless means irrespective of the end.'

Not only does the Supreme Court object to third degree methods in criminal cases, it also objects to racial discrimination in the selection of grand juries. In Smith v. Texas, the Court reversed the conviction of a Negro where the evidence showed that in the selection of grand juries for many years Negroes had been discriminated against.

The desire of the Supreme Court to protect religious freedom does not go so far as to require its interference with the action of a Board of Education in expelling students, who because of religious convictions refuse to salute the flag (Minersville School District v. Gobitis). The majority opinion in this case, however, brought forth a strong dissent by Mr. Justice Stone, who pointed out that while such expressions of loyalty as the salute to the flag 'when voluntarily given, may promote national unity, it is quite another matter to say that their compulsory expression by children in violation of their own and their parents' religious convictions can be regarded as playing so important a part in our national unity as to leave school boards free to exact it despite the constitutional guarantee of freedom of religion. The very terms of the Bill of Rights preclude, it seems to me, any reconciliation of such compulsions with the constitutional guaranties by a legislative declaration that they are more important to the public welfare than the Bill of Rights.'

Anti-Trust and Price-Fixing Cases.

A number of decisions of the utmost importance in the administration of the Sherman Anti-Trust Laws were handed down by the Supreme Court in 1940. In U. S. v. Socony Vacuum Oil Company, the Court applied the basic proposition that price fixing agreements are unlawful per se, to an attempt by midwestern oil companies to stabilize prices and avoid ruinous competition in the sale of gasoline. 'Agreements for price maintenance, of articles moving in Interstate Commerce are without more unreasonable restraints within the meaning of the Sherman Act because they eliminate competition,' stated the Court. 'No showing of so-called competitive abuses which those agreements were designed to eliminate or alleviate may be interposed as a defense' to a prosecution under the Sherman Act. In justification of this position the Court pointed out that 'Ruinous competition, financial disaster, evils of price cutting and the like appear throughout our history as ostensible justifications for price-fixing. If the so-called competitive abuses were to be appraised here, the reasonableness of prices would necessarily become an issue in every price-fixing case. In that event the Sherman Act would soon be emasculated; its philosophy would be supplanted by one which is wholly alien to a system of free competition; it would not be the charter of freedom which its framers intended.'

A similar attitude of refusing to sanction price-fixing agreement also determined the Court's decision in the case of Ethyl Gasoline Corporation v. U. S.. In that case the defendant held the exclusive patent on tetraethyl lead, which, when added to gasoline increased its motor efficiency. It manufactured this fluid and sold it to most of the major refineries of the country under a license. It also purported to license the jobbers in ethyl gasoline and prohibited the refiners from selling to unlicensed jobbers. The defendant reserved to itself the right to cancel licenses at will. It made a practice of ascertaining which jobbers failed to comply with the market prices of the major oil companies. Through its rejection of applications for licenses and in other ways it created the belief that refiners and jobbers must maintain prices. The defendant patentee therefore built up a combination which was actually used to suppress competition among jobbers and control their prices. The Court stated that such a combination was unlawful even though a patented article was involved.

While the Court has no hesitancy in applying the prohibitions of the Sherman Act to restraints upon commercial competition in the marketing of goods, in the case of Apex Hosiery Company v. Leader, it refused to sanction the application of the Act to a sit-down strike called by a labor union. Although the Court stated that the Sherman Act could be made to apply to certain activities of labor unions, the sit-down strike did not bring about such 'a suppression of competition in the market' which warranted its invocation.

The Court has also upheld price-fixing and stabilization of the bituminous coal industry by government commission, although, as we have seen, price-fixing by business men came to grief (Sunshine Anthracite Coal Company v. Adkins). In that case the Court passed upon the constitutionality of the Bituminous Coal Act of 1937. The Act provided for the organization of coal producers under a bituminous coal code and a 19½ per cent tax on the sale price or market value of the coal of non-members. The Act provided for the fixation by the Commission of minimum and maximum prices on coal in accordance with certain standards. Although a similar attempt to regulate the bituminous coal industry came to grief in 1936 (Carter v. Carter Coal Company) when the Supreme Court declared the Bituminous Coal Conservation Act unconstitutional, the Court stated in the Adkins case: 'The fixing of prices, the proscription of unfair trade practices, the establishment of marketing rules respecting such sales of bituminous coal constitute regulations within the competence of Congress under the commerce clause. . . . It was the judgment of Congress that price-fixing and the elimination of unfair competitive practices were appropriate methods for prevention of the financial ruin, low wages, poor working conditions, strikes, and disruption of the channels of trade which followed in the wake of the demoralized price structures in this industry. If the strategic character of this industry in our economy and the chaotic conditions which have prevailed in it do not justify legislation, it is difficult to imagine what would. To invalidate this Act we would have to deny the existence of power on the part of Congress under the commerce clause to deal directly and specifically with those forces which in its judgment should not be permitted to dislocate an important segment of our economy and to disrupt and burden interstate channels of trade.'

National Labor Relations Board Cases.

The exclusive and far-reaching power of the NLRB to deal with violations of the National Labor Relations Act was emphasized by the Court in a number of decisions. In Amalgamated Utility Workers v. Consolidated Edison Co., the Supreme Court refused to permit a labor union to bring an action before the Circuit Court of Appeals to punish the defendant employer for contempt because of his failure to obey a decree of the NLRB. The exclusive authority to enforce its orders rested with the NLRB and the Act gave no private person or group any standing in the courts to secure the enforcement of its decrees.

In National Licorice Company v. NLRB, the authority of the NLRB to order an employer not to enforce contracts with its employees in violation of the National Labor Relations Act was upheld although the employees affected were not parties to the proceeding. The right asserted by the Board, stated the Court, is not one arising from contracts between the employer and the employees. The Board asserts a public right vested in it as a public body charged with the duty of preventing unfair labor practices. Obviously employers cannot set at naught the National Labor Relations Act by inducing the workmen to agree not to demand performance of the duties which it imposes.

In International Association of Machinists v. NLRB, the Court decided that the Board could direct an employer to cease giving effect to a closed shop contract with an A.F. of L. union and deal with a C.I.O. union where the A.F. of L. union had been assisted in its organization of employees by unfair labor practices on the part of the employer.

In NLRB v. Waterman Steamship Company, the Court reversed the judgment of the Circuit Court of Appeals which refused to enforce an order of the NLRB requiring the defendant to refrain from discriminating against sailors belonging to the C.I.O. in favor of sailors belonging to the A.F. of L. The Circuit Court had felt that the Board's order was not supported by substantial evidence. The Supreme Court however pointed out that the Circuit Court could not substitute its judgment on disputed facts for that of the Board. So long as the Board's findings of fact was supported by evidence it was conclusive on the Courts.

The NLRB did not have things all its own way in the Supreme Court. In the case of Republic Steel Company v. NLRB, the Court decided that the Board did not have the authority to compel an employer to pay over to the Federal Government money which the latter had expended in maintaining unlawfully discharged employees on work relief projects.

Tax Decisions.

As government expenditures rise the states cast about frantically for new sources of revenue to meet their needs. There is a temptation to tax all forms of property coming into the state even though by so doing a burden may be laid upon interstate commerce. A number of cases raise the question of how far the states may go in taxing property moving in interstate commerce. In McGoldrick v. Berwind-White Coal Mining Company, the Court held that New York City could impose a 2 per cent sales tax paid by the purchaser on sales of coal made by the defendant corporation from its sales office in New York, although the coal sold came from its mines in Pennsylvania. A different result was reached in McGoldrick v. Gulf Oil Corporation. There the Comptroller of New York City attempted to impose a sales tax on fuel oil manufactured in New York from petroleum imported from a foreign country, stored in bond under United States customs supervision. The fuel oil was sold only to vessels engaged in foreign commerce. The tax was held to be an infringement of the Congressional regulation of interstate commerce.

In McCarroll v. Dixie Greyhound Lines, the Court likewise declared an Arkansas statute invalid which prohibited the entry into the state of autos carrying more than 20 gallons of gas until the state tax of 6½ cents per gallon was paid. The state sought to apply this statute to a bus company, whose buses ordinarily carried 77 gallons of gas in their tanks and used only 16 in their passage through Arkansas. The Court held that Arkansas could not constitutionally tax the gasoline not used in the state.

Court's Relation to Administrative Agencies.

As economic life becomes more complex, the regulation of certain phases of economic activity tends to be turned over to specialized governmental administrative agencies. This is being done despite the politically inspired cry of 'hands-off business.' That business itself recognizes the need for governmental regulation is aptly demonstrated by the case of United States v. American Trucking Associations. The petitioner, an association of truckmen, sought to compel the Interstate Commerce Commission to establish qualifications and hours of service for all employees of motor vehicle common carriers. The I.C.C. refused to act because of a lack of jurisdiction. The position of the Commission was sustained by the Supreme Court.

The increasing activity of governmental administrative agencies, however, raises troublesome problems of their relations to the Courts and the right of Courts to interfere with their rulings. The Walter-Logan Bill sponsored by the American Bar Association and vetoed by the President offered one solution to these problems. We have already noted that in the Waterman case before mentioned, the Supreme Court declared that findings of fact by the NLRB were conclusive so long as they were supported by some evidence even though the Court itself might not make a similar finding if it had to pass upon the matter in the first instance. In a number of other cases the Supreme Court indicated a reluctance to substitute its judgment as to the wisdom of a particular action for that of the administrative agency. In United States v. Chicago Heights Trucking Company, for example, the I.C.C. canceled the tariffs of 41 interstate common carriers on the ground that they were discriminatory. The truckmen obtained an injunction in the District Court to restrain the Commission from enforcing its order. The Supreme Court however reversed the judgment of the District Court stating in the course of its opinion: 'It is not disputable that from the beginning the very purpose for which the Commission was created was to bring into existence a body which, from its peculiar character, would be most fitted to primarily decide whether from facts disputed or undisputed, in a given case, preference or discrimination existed. And where a Court substituted its judgment as to the existence of preference for that of the Commission, on the ground that where there was no dispute as to the facts it had a right to do so, [the Court] obviously exerted an authority not conferred upon it by statute.''

In the case of Railroad Commission v. Rowan & Nichols Oil Company, the Court considered the question of the interference of a Federal District Court with the decision of a state administrative body. The State of Texas in that case had devised a regulatory scheme to conserve its oil resources and placed its administration in the hands of the Railroad Commission. The Rowan & Nichols Oil Company complained that the method of regulation employed by the Commission disregarded its right to the oil on its lands and that an entirely different formula had to be used by the Commission, if the oil company's property was not to be taken without due process of law. Both the Federal District Court and the Circuit Court of Appeals agreed with this contention. The Supreme Court however upheld the Commission's action. It pointed out that 'A controversy like this always calls for fresh reminder that Courts must not substitute their notions of expediency and fairness for those which have guided the agencies to whom the formulation and execution of policy have been entrusted.' According to the Court it is not for the Federal Courts to supplant the Commission's judgment even in the face of convincing proof that a different result would have been better.

It is evident from the above decisions that the Supreme Court will serve as a brake upon the interference by the Lower Courts with the work of administrative agencies. The weight of the Supreme Court's authority is cast in the direction of letting bona fide administrative decisions stand without fear of judicial nullification. See also UNITED STATES: Supreme Court Decisions.