PANAMA REFINING CO. v. RYAN 293 U.S. 388 (1935)

In 1933 the price of wholesale gasoline had fallen to two and a half cents a gallon, that of crude oil to ten cents a barrel. The states, unable to cut production and push up prices, clamored for national controls. Congress responded with section 9(c) of the national industrial recovery act, authorizing the President to prohibit the shipment in interstate commerce of petroleum produced in excess of quotas set by the states. By a vote of 8–1 the Supreme Court, in an opinion by Chief Justice charles evans hughes, for the first time in history held an act of Congress unconstitutional because it improperly delegated legislative powers to the President without specifying adequate standards to guide his discretion. Moreover, the act did not require him to explain his orders. Vesting the President with "an uncontrolled legislative power," Hughes said, exceeded the limits of delegation; he did not explain how much delegation is valid and by what standards.

justice benjamin n. cardozo disagreed. He found adequate standards in section 1 of the statute: the elimination of unfair competitive practices and conservation of natural resources. These objectives guided the President's discretion, Cardozo explained. The principle of separation of powers, which the majority used to underpin its opinion, should not be applied with doctrinaire rigor. Moreover, the statute, Cardozo observed, "was framed in the shadow of a national disaster" which raised unforeseen contingencies that only the President could face from day to day. The standards for his discretion had to be broad, and he need never give reasons for executive orders. Cardozo's opinion notwithstanding, the Court in effect removed the oil industry from effective controls, to its detriment and that of the national economy. This case marked the new deal's debut before the Court.

Leonard W. Levy
(1986)

(see also: Delegation of Power.)