Chicken Corporation – Roosevelt controversy

Seventy-six years ago, four brothers defeated President Franklin D. Roosevelt in what had become known as “The Sick Chicken Case.” The sad story of these four poultry dealers demonstrated that then as today, fighting for justice can be a long, expensive battle.

A Beloved President

Despite claims that he should have done more to help European Jews be­fore and during World War II, President Franklin D. Roosevelt was immensely popular among US Jews in his time, re­ceiving 85 to 95 percent of their votes throughout the twelve year of his presi­dency, which stretched from 1933 to 1945. At the time he first became presi­dent, Jews had suffered from significant discrimination. Many elite universities set quotas for Jewish admission and Jews often found that promotion to the high­est government and business positions was closed to them. During Roosevelt’s presidency, however, Jews were increas­ingly appointed to and won top level po­litical positions and included one cabinet member, three Supreme Court judges, four governors, and hundreds of lower officials.

Altogether, while comprising only three percent of the US population, Jews occupied 15% of Roosevelt’s appointed positions, and so many of them helped Roosevelt draft his ambitious “New Deal” program for economic recovery from the Great Depression that some detractors derisively termed it the “Jew Deal.”

Accordingly, it is all the more surpris­ing that four Jewish brothers were instru­mental in killing a major part of the New Deal program known as the National Industrial Recovery Act (NIRA) whose purpose was to curb unemployment and stimulate business through codes of fair competition that illegalized price and wage slashing, yet soon became notori­
ous for generating vast numbers of regu­lations including 557 basic and 189 sup­plementary codes, plus prohibitions and orders that ran into the thousands.

Public reaction to the NIRA was mixed. Many businessmen complained that it was ridiculous to keep prices high when people had no money to buy and that the new code granted workers more rights than their employers. One woman wrote to Roosevelt that the code led to the loss of her job: “I have been em­ployed as a clerk at E. J. Schlichte Com­pany for seven years five months until the N.R.A. went into effect. They let me out, saying they couldn’t pay me $14 a week. When the N.R.A. went into effect, I was so happy. I had planned to lay in some coal and pay some bills I owe, but I guess I was too happy.”

The Poultry Giants

In April 1934, the President approved a section of the NIRA that was especially germane to observant Jews, the grandi­osely named “Code of Fair Competition for the Live Poultry Industry of the Met­ropolitan Area in and about the City of New York.” A giant live poultry industry had developed due to the need of obser­vant Jews to have shechted chicken. To produce the 200 million pounds of ko­sher chicken consumed a year, the New York metropolitan area had 400 slaughter houses with about 2,000 employees, gen­erating annual business of between fifty to sixty million dollars.

The Schechter brothers were the larg­est players in this fi eld, grossing a mil­lion dollars of business a year through their two corporations located in Brook­lyn. They bought live poultry at markets or railroad terminals, had the chickens slaughtered by shochtim and then sold the product to retail poultry dealers and butcher stores.

Three rules of the Code of Fair Com­petition for the Live Poultry Industry led
to the penalization of the Schechter broth­ers. It was prohibited to “purchase or sell for human consumption culls or other produce that is unfit for the purpose,” to engage in “destructive price cutting,” or to practice “straight killing.” The third rule meant that although allowed to select a coop or half a coop of chickens, cus­tomers did not “have the right to make any selection of particular birds.”

Government officials claimed that most poultry businesses approved of the code and wanted it to continue. The Shechter brothers regarded the suppres­sion of normal competition ridiculous. Interestingly, their opinion was recently supported in 2004 by two economists who claim that Roosevelt’s New Deal policies lengthened the Great Depres­sion by seven years. As they explain, President Roosevelt believed that exces­sive competition was responsible for the Depression because it led to a reduction of prices and wages, and by extension employment and demand for goods and services. FDR came up with a recovery package that would be unimaginable to­day, allowing businesses in every indus­try to collude without the threat of anti­trust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies.

Government agents were appointed to enforce the application of the new codes and before long the brothers were plagued by repeated visits of inspectors who were rude to customers to the point of damaging business. This culminated with a sixty-count indictment that includ­ed claims of undercutting rivals with low prices and selling sick chickens.

The New York Times of July 27, 1934, reported that the “indictments include sixty counts, the most lengthy thus far found under the NRA [National Recov­ery Administration]. It is the first real test of the issue of the constitutionality of the NRA. This case, it is believed, will be the determining factor in deciding whether the Federal Government has jurisdic­ tion to interfere m a local industry on the grounds that the matter affects interstate commerce.”

A Pyrrhic Victory

When a court found the brothers guilty of eighteen of the counts includ­ing the charge that their selling of sick birds “resulted in making New York a dumping ground for diseased live poul­try for which shippers can find no market in other large cities,” and slapped them with a $7,424 fine and sentences ranging from three months to a month, the broth­ers decided to appeal the verdict in the Supreme Court where many strange facts surfaced.

Among other things, the claim of the brothers selling unhealthy chickens nar­rowed to only three chickens, and then to one – a live chicken that had eggs lodged inside it – which the brothers could hardly be expected to know about.

On top of that, when one justice asked a government attorney, “About this regu­lation that defines when a chicken is sick and when it isn’t, where is it? We can’t seem to fi nd the rule in any of the par­ties’ legal briefs,” the government’s attor­ney promised the court he would track it down and provide it to the court. It then took days for the newly-hired NIRA staff to find the lone original typed regulation “in the top drawer of a staff employee’s desk” and have it hand-delivered it to the Court. All of the justices were incensed to learn that the Government was seeking to enforce a rule that existed in writing only on a single piece of paper inside a single bureaucrat’s desk. Additionally, they all felt that it was an affront to the judiciary to ask them to review a government regu­lation of such obscurity.

On May 27, 1934, crowds packed the court room to hear Chief Justice Hughes deliver the opinion of the Supreme Court. To the government’s shock, he acquitted the brothers on all counts, arguing that the NIRA code was vague and also that its enabling of the President to approve and prescribe vast numbers of codes on his own authority was an unconstitutional

delegation of legislative power. The con­stitution, said the judge, stood above ev­erything: “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.”

“America Stunned! Roosevelt’s Work Killed in 20 Minutes,” a London newspa­per headlined, and indeed, the govern­ment dropped about five hundred simi­lar cases against people charged with breaking NIRA codes.

As for the Shechter brothers, the New York Times of May 28 reported that their satisfaction was tempered by the stiff fi­nancial cost of achieving victory. They announced through their attorney, Jo­seph Heller: “We feel most happy to be able to say that the highest court of this land has definitely stated that we are not guilty of any misconduct in business. We have always claimed that the Code Authority made us ‘the goat.’ Our victo­ry indicates that American justice does not permit persecution.”

On the other hand, Joseph Shechter declared that he would rather have gone to jail than foot the $60,000 cost of the legal battle; he had used up every nickel he had to pay only a part of it. Besides, the New Deal with its raised wages and high price of grain had ruined him financially. His business, which had earned $20,000 weekly prior to the New Deal, now earned only $2,000 to $3,000 weekly, and it was presently not func­tioning at all due to a consumer strike that had recently broken out against ko­sher butcher shops due to high pricing.

Although the important Schechter decision has been cited dozens of times since by the Supreme Court, the Schechter family found that they had won a pyrrhic victory. According to family tradition, Jews were unhappy at the brothers’ attack against their be­loved President Roosevelt and stopped buying from them. And the biggest poultry business in New York came to a floundering end.

(Sources: The New York Times ar­ticles. Statement of two economists: “FDR’s policies prolonged Depression by 7 years, UCLA economists calcu­late” by Meg Sullivan, August 10, 2004, UCLA Newsroom. Story of missing chicken-health regulation: “Pensacola Beach Blog.”)

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