Evening star., 1935-12-12
STATES DEFENDED
AGAINST CONGRESS
Decision by Supreme Court
Repeats U. S. Invasion
of Rights.
BY DAVID LAWRENCE.

while attracting much less attention
than the Schechter case, may pos
sibly some day attain almost equal
Importance in resisting the power OF
Congress to encroach on the rights Of
the States.
The court proclaimed that corpo-
ration created by a State was gov
erned by the laws of that State and
that only under certain circumstances
enumerated and specified by the Fed
eral Constitution itself could the Fed
eral authority be exerted.
This principle may conceivably
mean that the Guffey act is uncon-
stitutional, that the public utility hold
ing company act is unconstitutional
and that the O'Mahoney bill, spon-
sored by the American Federation Of
Labor, to compel corporations to take
out Federal charter or license and
submit themselves to Federal regula-
ton as to management and operations
may also be declared invalid If 1t is
ever passed by Congress.
States Assent Necessary.
Briefly. the Supreme Court ruled
that a State corporation cannot be
dissolved or its powers taken from
it by an act of Congress unless the
State which creates the corporation
aSsents to the change. This could
mean that the coal companies incor-
porated under State law would hardly
be compelled to accept Federal juris
diction unless they were already sub
ject to the interstate commerce clause
of the Constitution, and this. of course.
is not true of coal mining companies.
even though their product is destined
for interstate commerce.
Likewise. the Supreme Courts de-
cision may be read to mean that a
public utility holding company char
tered. for instance. under the laws
of the State of Delaware cannot be
dissolved or destroyed by Federal
law or brought within the purview
Of a Federal commission like the
Securities and Exchange Commission
and then sabotaged. But these holding
companies can certainly be covered
under Federal authority solely for
purposes Of preventing the improper
sale Of their SECURITIES or the fraud
IN interstate commerce because the
business Of transmitting securities to
and from across State lines Is dis
tinctly an interstate commerce trans
action.
It is on the attempt, however, to
interfere4n the management of hold
Ing companies or to force the dis
solution of assets segregated in holding
companies that the rule of the court
announced this week may come into
play. 1t might be inferred from the
text of the opinion that the several
States, having created corporations
and made laws to govern the con-
ditions under which investors put
their funds in those holding COM
panies, have a right to object to the
encroachment by a Federal body
which undertakes to destroy or modify
the value of those holdings by an
edit of destruction such as the
death sentence" contains.
May Require Federal Charters.
Similarly with respect to Federal
charters for business, Congress might
wish, for certain interstate commerce
reasons, that are In accord with con-
stitutional precedent, to require char
ters to be taken out in Washington,
but this in no way could operate
constitutionally so as to affect man
sgement or impose burdens that relate
to the operations of the corporations
themselves.
Justice Cardozo was careful to
haf fY1f he
court was not concerned with the
scope of power ito regulate transac-
tions affecting interstate and foreign
commerce" or any other delegated
power, because, as each case arose, the
court would be under the necessity of
deciding whether the exercise Of
these specified powers in any way
transcended the States rights clause
of the Constitution, known as the
tenth amendment.
But, earlier in the same opinion,
Mr.. Cardozo made it clear, neverthe-
less, that compulsory conversion Of
State corporation into a Federal cor
poration was such tranSgression of
States rights. He declared that If
the section in question enacted by
Congress were upheld when State
laws are inconsistent with It's pro-
visions. then the power would extend
"even to moneyed corporations gen.
orally and even to other corporations
If Congress chooses to convert them
into creatures of the Federal Govern
ment."
Again he stated the problem thus:
"The critical question is whether
along with such a power Chat Is,
Federal authority to create building
and loan associations) there goes
the power also to put an end to cor
porations created by the States and
turn them into different corporations
created by the Nation" He answered
the question in the negative.
Destruction Necessity Denied.
In another part of the same decision |
Mr.. Cardozo asserts that the de
struction of associations" or CORPORA
tions established by State ''is not an |
exercise Of power reasonably necessary
for the maintenance by the central |
Government of other associations cre-
ated by itself in furtherance of kin. |
dred ends"
The court saw, therefore, no objec-
ton to the coexstence Of Federal and |
State corporations, but In effect |
warned that they must each dwell |
within their respective domains and |
that, in this case, the attempt of the |
Congress to give the Federal Home |
Loan Corp. certain powers over build |
ing and loan associations contrary to |
State laws did not involve an en-
eroachmert outside of the Federal do
main.
so far as Federal corporations are
concerned, the advocates Of the license
system want it primarily to put into
the hands of the Federal commissions |
the right to regulate employer and
employe relations or to fix prices or
output-in short, to do all those things
which the N. r. A. tried to do and |