Panama Refining Co. v. Ryan
Reference: 293 US 388 (1935)
Term: 1934
Important Dates
Argued: Dec 10 - 11, 1934 Decided: Jan 7, 1935
Outcome
United States Court of Appeals for the 5th Circuit reversed
Majority
Charles E. Hughes •Willis Van Devanter •James Clark McReynolds •George Sutherland •Louis Brandeis •Pierce Butler •Harlan Fiske Stone •Owen Roberts
Concurring
None
Dissenting
Benjamin Cardozo

Panama Refining Co. v. Ryan is a case decided on January 7, 1935, by theUnited States Supreme Court. It involved the constitutionality of Section 9(c) of Title I of theNational Industrial Recovery Act, which had authorized the President to "prohibit the transportation in interstate and foreign commerce of petroleum" in excess of state quotas, and to publish violators with fines and jail time.^[1] The Supreme Court reversed the ruling of theUnited States Court of Appeals for the 5th Circuit and ruled that Section 9(c) represented anunconstitutional delegation of legislative power to the President.^[2]

In brief: Section 9(c) of the National Industrial Recovery Act authorized the President to stop the interstate transportation of excess (or 'hot') oil. He then delegated that power to the Secretary of the Interior through a series of executive orders. Two Texas oil companies, Panama Refining Co. and Amazon Petroleum Corp. filed separate lawsuits challenging the Secretary of the Interior's regulations and Section 9(c) of the NIRA. The Supreme Court sided with the companies and found Section 9(c) to be an unconstitutional delegation of legislative power.

Why it matters:The case struck down Section 9(c) of the NIRA, which was a major component of Franklin D. Roosevelt's New Deal. The ruling inA.L.A. Schechter Poultry Corp. v. United States later the same year struck down Section 3 and effectively neutralized the entire act. BothSchechter andPanama were major cases in the development of thenondelegation doctrine and laid the groundwork for many subsequent rulings.

Background

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The National Industrial Recovery Act was passed in 1933 in response to the Great Depression and gave the President wide authority to regulate the economy. Section 9(c) of the act dealt with hot oil, which was oil produced in excess of state quotas, then sold in other states.

President Franklin D. Roosevelt then delegated this power to the Secretary of the Interior, who issued regulations that required all petroleum companies to provide monthly statements under oath verifying details of their business practices and to retain all work-related documents for potential inspection by the Department of the Interior, among other things.

Panama Refining Company and Amazon Petroleum Corporation, both oil producing companies in Texas, launched their own respective lawsuits against the Department of Interior's regulations and the constitutionality of the NIRA. The District Judges in both cases sided with the companies against the government, but theFifth Circuit Court of Appeals ruled in favor of the federal government and directed that both lawsuits be thrown out. The cases then appeared together before the Supreme Court under the namePanama Refining Co. v. Ryan.^[2]

Oral argument

Oral arguments were held from Dec 10-11, 1934. The case was decided on Jan 7, 1935.^[4]

Decision

The court ruled 8-1 that Section 9(c) of the National Industrial Recovery Act unconstitutionally delegated legislative power to the President, which also rendered the executive orders governing hot oil invalid. Chief JusticeCharles E. Hughes wrote the majority opinion and was joined by JusticesWillis Van Devanter,James Clark McReynolds,George Sutherland,Louis Brandeis,Pierce Butler,Harlan Fiske Stone, andOwen Roberts. JusticeBenjamin Cardozo wrote a dissenting opinion.^[2]

Opinions

Opinion of the court

Writing for the court, Chief JusticeCharles E. Hughes pointed out that the validity of the Department of Interior's regulations rested on the constitutionality of Section 9(c) of the NIRA, which was the original source of their authority. He further argued that the allowance or prohibition of transportation of goods was "obviously one of legislative policy," meaning that a delegation of power had occurred.^[2] The court's next step was to search for an intelligible principle in the legislation that guided and limited the President's power, though in this case none could be found.

The court thus ruled that Section 9(c) unconstitutionally delegated legislative power to the executive branch.

Concurring opinions

There were no concurring opinions.

Dissenting opinions

JusticeBenjamin Cardozo wrote a dissenting opinion in which he argued that the NIRA had provided enough guidance to keep the President and Interior Secretary's actions within constitutional bounds.

He also argued that the circumstances of the Great Depression necessitated Presidential action.

Impact

In the majority opinion, Chief Justice Hughes placed Section 9(c) and its related executive orders in historical context to further explain the court's decision to declare them unconstitutional.

The court's examination traced the history of delegated power and the evolution of thenondelegation doctrine. Field v. Clark (1892) had held that the idea that "Congress cannot delegate legislative power to the president' is 'universally recognized as vital to the integrity and maintenance of the system of government ordained by the constitution." In that case, the statute in question had been constitutional because the President had served as "the mere agent of the law-making department."^[2][5] The ruling inField v. Clark had played an important part inJ.W. Hampton Jr. & Company v. United States (1928), which established the intelligible principle test. This test remains an integral part in determining the constitutionality of a delegation of power (see Whitman v. American Trucking Associations (2001)).

Chief Justice Hughes then drew onWayman v. Southard (1825), an even earlier case, to clarify the bounds of delegation.

The court concluded by reiterating that while delegation remained an important tool for Congress to manage the needs of a modern state, it required clear boundaries and constant monitoring.

The Supreme Court chose not to examine the constitutionality of the Petroleum Code inPanama v. Ryan. A similar code for the poultry industry was the subject ofA.L.A. Schechter Poultry Corp. v. United States later that year. That case found Section 3 of the NIRA to be unconstitutional.Panama andSchechter are the only two cases in which a law has been overturned for violating thenondelegation doctrine (seeMistretta v. United States andWhitman v. American Trucking Associations).

Following the decision inPanama Refining Co. v. Ryan, Congress passed the Connally Hot Oil Act of 1935, which contained many of the provisions from Section 9(c) of the NIRA.^[7]

See also

• A.L.A. Schechter Poultry Corp. v. United States
• J.W. Hampton Jr. & Company v. United States
• Nondelegation doctrine
• Separation of powers
• Rulemaking
• Supreme Court of the United States
• History of the Supreme Court

External links

• Full Text of the Case via Justia
• Supreme Court of the United States
• Search Google News for this topic

Footnotes

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Gardner •A.L.A. Schechter Poultry Corp. v. United States •Association of Data Processing Service Organizations v. Camp •Auer v. Robbins •Chevron v. Natural Resources Defense Council •Citizens to Preserve Overton Park v. Volpe •Federal Trade Commission (FTC) v. Standard Oil Company of California •Field v. Clark •Food and Drug Administration v. Brown and Williamson Tobacco Corporation •Humphrey's Executor v. United States •Immigration and Naturalization Service (INS) v. Chadha •J.W. Hampton Jr. & Company v. United States •Lucia v. SEC •Marshall v. Barlow's •Massachusetts v. Environmental Protection Agency •Mistretta v. United States •National Federation of Independent Business (NFIB) v. Sebelius •National Labor Relations Board v. Noel Canning Company •National Labor Relations Board v. Sears, Roebuck & Co. •Panama Refining Co. v. Ryan •Securities and Exchange Commission v. Chenery Corporation •Skidmore v. Swift & Co. •United States v. Lopez •United States v. Western Pacific Railroad Co. •Universal Camera Corporation v. National Labor Relations Board •Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council •Wayman v. Southard •Weyerhaeuser Company v. United States Fish and Wildlife Service •Whitman v. American Trucking Associations •Wickard v. Filburn •Wiener v. 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Dresch (2000) "Confronting the Administrative Threat" by Philip Hamburger and Tony Mills (2017) "Constitutionalism after the New Deal" by Cass R. Sunstein (1987) Federalist No. 23 by Alexander Hamilton (1787) "From Administrative State to Constitutional Government" by Joseph Postell (2012) "Interring the Nondelegation Doctrine" by Eric A. Posner and Adrian Vermeule (2002) "Rulemaking as Legislating" by Kathryn Watts (2015) "The Checks & Balances of the Regulatory State" by Paul R. Verkuil (2016) "The Myth of the Nondelegation Doctrine" by Keith E. Whittington and Jason Iuliano (2017) "The Progressive Origins of the Administrative State: Wilson, Goodnow, and Landis" by Ronald J. Pestritto (2007) "The Rise and Rise of the Administrative State" by Gary Lawson (1994) "The Study of Administration" by Woodrow Wilson (1887) "The Threat to Liberty" by Steven F. Hayward (2017) "Why the Modern Administrative State Is Inconsistent with the Rule of Law" by Richard A. Epstein (2008) Agencies Administrative Conference of the United States •United States Civil Service Commission •U.S. Government Accountability Office •U.S. Office of Information and Regulatory Affairs •U.S. Office of Management and Budget