The Gold Clause Cases and Constitutional Necessity

I thought I’d post the introduction of this paper below the fold.  When I write the rest of it, I’ll post the SSRN link.

The very essence of civil liberty certainly consists in the right of every individual to claim the protection of the laws, whenever he receives an injury.[1]

Marbury v. Madison

Few more baffling pronouncements, it is fair to say, have ever issued from the United States Supreme Court.[2]

Henry M. Hart, Jr, (describing Perry v. United States)

Constitutional leaders must mediate the tension between the rule of law and the law of necessity.[3] Thomas Jefferson, who made the Louisiana Purchase in spite of serious concerns about its legality, once wrote that “[a] strict observance of the written law is doubtless one of the high duties of a good citizen, but it is not the highest.  The laws of necessity, of self-preservation, of saving our country when in danger, are of higher obligation.”[4] Abraham Lincoln defended his unilateral suspension of habeas corpus at the beginning of the Civil War by asking “are all the laws but one, to go unexecuted, and the government itself go to pieces, lest that one be violated?”[5] And law students are typically introduced to the Supreme Court with a lesson about how John Marshall cleverly balanced principle and politics by establishing judicial review and pontificating about the importance of remedies just he was denying a remedy to avoid a confrontation with the President.[6]

To explore how constitutional actors think through claims of legality and pragmatism under great stress, this Essay examines the Gold Clause Cases, in which the Justices rejected various challenges to Franklin D. Roosevelt’s decision to remove the United States from the gold standard.[7] New Deal historians commonly compare the Court’s disposition of Perry v. United States,[8] the case about the abrogation of the gold clause in federal bonds, to Marbury because Perry headed off a political showdown by ruling that the bondholder was not entitled to damages even though his rights were violated.[9] Notwithstanding that intriguing parallel, modern lawyers know nothing about Perry.[10] This is a glaring omission from the professional canon because that decision, along with the companion case of Norman v. Baltimore and Ohio Railroad Co.[11] upholding the abrogation of gold clauses in private contracts, was at least as important for the evolution of the New Deal as A.L.A. Schechter Poultry Corp. v. United States,[12] which is considered the critical moment of 1935 by most scholars.[13] The resolution of the monetary question in favor of devaluation deprived the President’s populist critics of vital ammunition and allowed the country to avoid a repeat of the 1896 presidential campaign between William Jennings Bryan and William McKinley.[14]

What makes Perry especially fascinating is that the decision presented two branches of government with tough dilemmas at the same time.[15] In a recent article, Sanford Levinson and Jack M. Balkin distinguished between three types of constitutional crises.[16] A Type One crisis occurs when “political leaders publicly claim the right to suspend features of the Constitution in order to preserve the overall social order and to meet the exigencies of the moment.”[17] Type Two crises, by contrast, “arise from excess fidelity, where political actors adhere to what they perceive to be their constitutional duties even though the heavens fall.”[18] Perry involved a Type One and a Type Two crisis.  In the event of an adverse decision, the President was prepared to tell the nation that he would not comply because doing so would be an economic disaster.[19] While the White House was contemplating emergency rule, the Justices were struggling with what to do when their best interpretation of the Constitution—that the United States could not repudiate its debt obligations—would lead to chaos.[20] The intense pressure on the Court was reflected in its unprecedented decision to announce on two separate occasions that the opinions would not be issued at its next session.[21] By exploring how the President and Chief Justice Hughes—the author of Perry—sought to defuse (or in some instances, exacerbate) the problem, this Essay exposes the dark arts of constitutional law.[22]

Part I examines the decision to abandon the gold standard in 1933 and the litigation attacking that action.  Part II reviews President Roosevelt’s deliberations about what he should do if the Court ruled against the Administration, which ranged from seeking an extension of sovereign immunity in Congress to closing financial markets, and then closely reads his draft Fireside Chat announcing that he would defy the decision.[23] Part III explores how the Court resolved matters in Perry by following in Marbury’s footsteps and finding a way to say that there was no remedy for a violation of the bondholder’s rights.

[1] Marbury v. Madison, 5 U.S. (1 Cranch) 137, 163 (1803).

[2] Henry M. Hart, Jr., The Gold Clause In United States Bonds, 48 Harv. L. Rev. 1057, 1057 (1935).

[3] See, e.g., Guido Calabresi, Foreword: Antidiscrimination and Constitutional Accountability (What the Bork-Brennan Debate Ignores), 105 Harv. L. Rev. 80, 132 n.169 (1991) (quoting Justice Hugo Black’s view that “a judge who refuses ever to stray from his judicial philosophy, and be subject to criticism for doing so, no matter how important the issue involved, is a fool”); see also Terminiello v. City of Chicago, 337 U.S. 1, 37 (1949) (Jackson, J., dissenting) (“There is danger that . . . [the Court] will convert the constitutional Bill of Rights into a suicide pact.”).

[4] Letter from Thomas Jefferson to John B. Colvin (Sept. 10, 1810), reprinted in 4 The Founders’ Constitution 127, 127 (Phillip B. Kurland & Ralph Lerner, eds. 1987); see Ron Chernow, Alexander Hamilton 671 (2004) (quoting Jefferson’s comment to Madison that “[t]he less we say about the constitutional difficulties respecting Louisiana, the better”).

[5] Abraham Lincoln, Special Session Message (July 4, 1861), in 7 A Compilation of the Messages and Papers of the Presidents 3226 (James D. Richardson, ed. 1897); see Ex Parte Merryman, 17 F. Cas. 144, 147 (C.C.D. Md. 1861) (No. 9487) (Taney, C.J.) (holding that only Congress could suspend the writ); Amanda L. Tyler, Suspension As An Emergency Power, 118 Yale L. J. 600, 637-652 (2009) (discussing various aspects of the habeas suspension during the Civil War).

[6] See Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803); Barry Friedman, The Will of the People:  How Public Opinion Has Influenced the Supreme Court and Shaped the Meaning of the Constitution 62-63 (2009) (giving the conventional view of Marbury); Mark Tushnet, Constitutional Hardball, 37 J. Marshall L. Rev. 523, 538-43 (2004) (discussing Marbury in more detail).

[7] See Perry v. United States, 294 U.S. 330 (1935); Nortz v. United States, 294 U.S. 317 (1935); Norman v. Baltimore & Ohio R.R. Co. 294 U.S. 240 (1935); David Glick, Conditional Strategic Retreat:  The Court’s Concession in the 1935 Gold Clause Cases, 71 J. Pol. 800 (2009); cf. Walter Bagehot, The English Constitution 1 (Cosimo Classics, 2007) (1872) (“[A]n observer who looks at the living reality [of a constitution] will wonder at the contrast to the paper description.  He will see in the life much which is not in the books; and he will not find in the rough practice many refinements of the literary theory.”).

[8] 294 U.S. 330 (1935).

[9] See Perry, 294 U.S. at 354 (“Because the government is not at liberty to alter or repudiate its obligations, it does not follow that the claim advanced by the plaintiff should be sustained.”); Arthur M. Schlesinger, Jr., The Age of Roosevelt:  The Politics of Upheaval 259 (1960) (stating that the “opinion was a masterpiece of judicial legerdemain hardly matched in the annals of the Court since Marshall’s opinion in Marbury v. Madison”); Melvin I. Urofsky, Louis D. Brandeis 697 (2009) (“Not since Marbury v. Madison had a chief justice come up with such an ingenious way out of a political thicket.”).

[10] Perry was the subject of some major law review articles in 1935, see Hart, supra note 2; see also John Dawson, The Gold Clause Decisions, 33 Mich. L. Rev. 647, 647  (1935) (“[T]he gold clause decisions of February 18, 1935, have already taken their place among the great landmarks of American Constitutional history.”), but in the past thirty years only one has discussed the case in any detail, see Kenneth W. Dam, From the Gold Clause Cases To the Gold Commission:  A Half Century of American Monetary Law, 50 U. Chi. L. Rev. 504, 516-18 (1983).

[11] 294 U.S. 240 (1935).

[12] 295 U.S. 495 (1935).

[13] See, e.g., 2 Bruce Ackerman, We The People:  Transformations 302 (1998) (“I have been focusing on the supreme importance of the Schechter decision in refining the emerging New Deal vision of activist government.”).  Constitutional law casebooks, for example, usually include Schechter Poultry in their discussion of the Commerce Clause, but I would challenge anyone to find a casebook that contains extended excerpts from Perry or Norman.

[14] See Alan Brinkley, Voices of Protest:  Huey Long, Father Coughlin, and The Great Depression 111, 211 (1982) (explaining that populists in the 1930s opposed the gold standard and backed the remonetization of silver); Gerard N. Magliocca, The Tragedy of William Jennings Bryan:  Constitutional Law and the Politics of Backlash — (2011) (discussing Bryan’s Cross of Gold Speech); Amity Shlaes, The Forgotten Man:  A New History of the Great Depression 156 (2007) (“Many, especially from the West, were arguing for a currency backed by silver as well as gold.  Bryan had died, but never had the Cross of Gold seemed more punishing or his arguments against it more compelling.”).  The other critical event in 1935 was the murder of Senator Huey P. Long, which removed President Roosevelt’s most charismatic challenger and altered the constitutional form of the New Deal. See Gerard N. Magliocca, Huey P. Long and the Guarantee Clause, 83 Tulane L. Rev. 1, 36-44 (2008).

[15] Norman presented an awful conundrum for the President, see infra text accompanying notes —, but one cannot say with confidence, as was true with Perry, that the case posed a significant problem for the Justices, see infra text accompanying notes —.

[16] See Sanford Levinson & Jack M. Balkin, Constitutional Crises, 157 U. Pa. L. Rev. 707, 714 (2009).  What Levinson and Balkin call a Type Three crisis is not relevant for this Article.  See id. (“Type three crises involve situations where publicly articulated disagreements about the Constitution lead political actors to engage in extraordinary forms of protest beyond mere legal disagreements and political protests: people take to the streets, armies mobilize, and brute force is used or threatened in order to prevail.”).

[17] Id. at 721.

[18] Id. at 729.

[19] See, e.g., 1 F.D.R.:  His Personal Letters, 1928-1945, at 456-60 (Elliott Roosevelt, ed. 1950) (reproducing the draft intended for delivery if the Court decided the Gold Clause Cases against the Administration) [hereinafter Gold Speech]; see also William E. Leuchtenburg, The Supreme Court Reborn:  The Constitutional Revolution in the Age of Roosevelt 87-88 (1995) (discussing the President’s thinking on this issue); Jeff Shesol, Supreme Power:  Franklin Roosevelt vs. the Supreme Court 99 (2010) (stating that FDR’s draft “was a declaration of independence, of sorts, from the system of checks and balances”).

A comparison of the speech in the FDR Presidential Library and the one reproduced in a published collection reveals some minor differences.  I am going to treat the latter as the authoritative version because it is more easily accessible to researchers and because I cannot determine which one was the final draft.

[20] See, e.g., Elliot Thurston, Court Hears Closing Plea in Gold Case, Wash. Post (Jan. 12, 1935) at 1 (observing that at oral argument “the Government has put vast emphasis on what would happen if action already taken is undone rather than upon the legal issue of the power of Congress to abrogate gold clauses”); cf. Glick, supra note 7, at 807 (noting that Chief Justice Hughes’ papers on the Gold Clause Cases contain a newspaper article warning of dire consequences for the Court if it ruled against the Administration).

[21] See Robert H. Jackson, The Struggle for Judicial Supremacy 102 (1941) (stating that the Court issued these extraordinary statements).

[22] This Article also provides a compelling case study for the burgeoning literature on constitutional crises.  See, e.g., Eric A. Posner & Adrian Vermeule, Constitutional Showdowns, 156 U. Pa. L. Rev. 991 (2008); Keith E. Whittington, Yet Another Constitutional Crisis?, 43 Wm. & Mary L. Rev. 2093 (2002).

[23] See Robert H. Jackson, That Man:  An Insider’s Portrait of Franklin D. Roosevelt 65-66 (John Q. Barrett, ed., 2003) (discussing the sovereign immunity question); Letter from Franklin D. Roosevelt to Joseph P. Kennedy (Feb. 19, 1935), reprinted in 1 F.D.R., supra note 19, at 455 (noting that the SEC would have closed the markets in the event of a ruling in favor of retaining the gold clauses).

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2 Responses

  1. Doesn’t the claim of necessity kind of ignore the possibility of amending the Constitution, in order to make the “necessary” conduct genuinely constitutional?

    In any event, there are long term problems generated by the fact that the courts do not, typically, say, “This is unconstitutional, but we’ll permit it out of necessity.“. But instead say, “Because this is necessary, it’s constitutional.” The result is an accumulation of exceptions which are not acknowledged to BE exceptions, warping judicial reasoning, and making the judicial ‘interpretation’ of the Constitution go on a drunkard’s walk, progressively departing from any normal reading of the text.

    Perhaps we need a formal “necessity” exception mechanism, whereby the courts could explicitly hand out permission to temporarily violate the Constitution, in the event of necessity, but only for a limited time while an amendment was pursued. Said permission to expire if no amendment was forthcoming or pursued.

  2. Thomas says:

    It should also be noted in the constitution that all people show have all their impending death records in order like for example if they lived in Ohio all their Ohio death records would be correct and ready to file, of course for when they are deceased.