The Schechter Poultry case was a decisive victory for opponents of the New Deal. The unanimous decision of the Supreme Court, rendered on May 27, 1935 in a ruling written by Chief Justice Charles Evans Hughes, declared the National Industrial Recovery Act of 1933 unconstitutional on several grounds and so enraged Franklin D. Roosevelt that an open conflict with the Supreme Court followed.
The NIRA had authorized the president to approve, where put forward by responsible associations, or to impose otherwise rules for the conduct of business in many different industries. At the time it was enacted during the Hundred Days, the country was near the bottom of the Great Depression and the public mood favored drastic measures to cure the downward trend. The NIRA was intended to ensure that "fair" wages were paid and reasonable hours were worked, with the intent of preventing both predatory wage reductions and excessive hours for existing workers.
The Schlechter Poultry Corporation was engaged in wholesale poultry in New York City and was charged with eighteen violations of provisions of the NIRA. It appealed the conviction on several grounds, including the unconstitutional delegation of legislative powers to the executive branch, and the application of the interstate commerce clause to a business that was primarily intrastate.
The government countered that the purpose of the legislation was to resolve an exceptional economic situation and that it was within its rights because the poultry that the Schlechters bought was purchased in New York, and their license to operate was within New York, the sources of the poultry were sometimes outside New York.
The court began by dismissing the argument of exigency:
We are told that the provision of the statute authorizing the adoption of codes must be viewed in the light of the grave national crisis with which Congress was confronted. Undoubtedly, the conditions to which power is addressed are always to be considered when the exercise of power is challenged. Extraordinary conditions may call for extraordinary remedies. But the argument necessarily stops short of an attempt to justify action which lies outside the sphere of constitutional authority. Extraordinary conditions do not create or enlarge constitutional power. . . . Such assertions of extra-constitutional authority were anticipated and precluded by the explicit terms of the Tenth Amendment, — “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people". . . .
The court then adopted a highly restrictive definition of "interstate," which is concluded should be applied only to the commerce at that moment, without regard to any earlier interstate character:
The undisputed facts thus afford no warrant for the argument that the poultry handled by defendants at their slaughterhouse markets was in a “current" or “flow" of interstate commerce and was thus subject to congressional regulation. . . . The poultry had come to a permanent rest within the State. It was not held, used, or sold by defendants in relation to any further transactions in interstate commerce, and was not destined for transportation to other States. Hence, decisions which deal with a stream of interstate commerce — where goods come to rest within a State temporarily and are later to go forward in interstate commerce — and with the regulations of transactions involved in that practical continuity of movement, are not applicable here. . . .
Although the NIRA was largely obsolete by 1935, it represented a bulwark of the theory on which the New Deal was founded. Within a week of the decision, Roosevelt had publicly declared that the Court`s "horse-and-buggy definition of interstate commerce" was an obstacle to national health. Even those who supported the New Deal worried that Roosevelt had crossed the line that separated the executive and judicial branches. Throughout 1936, there continued to be talk of constitutional changes to the Supreme Court, but Roosevelt waited. In 1937, the court began to uphold New Deal efforts, starting with West Coast Hotel Co. v. Parrish, and the clamor to change the court diminished.