Chapter 3.0. Federal Authority and The Economy: The Marshall Court, 1801-35, Introduction

After a period of relative weakness as an institution, John Marshall’s leadership as Chief Justice (1801-35) helped to make both the Supreme Court and the federal authority it asserted much stronger parts of the American legal system.

Appellate Jurisdiction

For example, in Martin v. Hunter’s Lessee (1816), the court for the first time made good on the Constitution’s grant of appellate jurisdiction over state courts (C3.2.1-2)–a controversial topic at the nation’s founding and one fraught with many interpretive challenges. In this complex case over land claims, the Virginia courts had upheld the state’s confiscation of land during the Revolutionary War from a loyalist, from whom a British subject, Denny Martin, had inherited the land in 1781. Virginia voided this transfer, and granted some of this land to a Virginia resident, David Hunter. The Virginia courts upheld the confiscation and grant of this land even though they violated the terms of the peace treaty of 1783 made between the U.S. and Britain. In a unanimous decision the U.S. Supreme Court overruled the Virginia courts, based on: Article III (as above); Section 25 of the Judiciary Act of 1789, which describes the court’s appellate jurisdiction in more detail; and the supremacy clause (C6.2), which makes federal laws and treaties superior to any contradictory state laws or rulings.

Although the Marshall Court helped shaped federal law and authority in many areas, many of its most well known and influential decisions concerned the economy.

Contracts and Corporations

In an important series of cases (though not excerpted in this chapter), the court clarified and strengthened certain features of contract law. In the case of Fletcher v. Peck (1810), the court for the first time enforced the contract clause (C1.10.1) against a state. This decision struck down a Georgia law of 1796 that had been passed to revoke a sale of public lands that a previous Georgia law of 1795 had approved. Even though this earlier sale had been revealed to be the result of corruption among the state representatives who had voted for it, the Marshall court upheld the original sales as valid contracts because subsequent buyers of these land titles were not involved in the legislature’s initial corruption.

In Dartmouth College v. Woodward (1819), the Marshall court enforced another aspect of the contract clause (C1.10.1) against the state of New Hampshire. The court was swayed in part by the famously eloquent arguments of Daniel Webster (1782-1852), whose speeches in a total of 223 cases before the Supreme Court helped him to become known as the “Great Orator.” In this case, the New Hampshire state assembly had passed a law to make Dartmouth College, originally founded as a private college, into a state university, against the objections of many of its trustees. This decision held that the college’s corporate charter, though originally granted by the state, constituted a private contract with the trustees, one that the state could not alter at will. By reinforcing the autonomy of private corporations, especially against certain kinds of interference by states, this decision also encouraged the somewhat later explosion of incorporation of private businesses.

The Commerce Clause

Another important case that expanded federal authority more directly, and which was also successfully argued by Daniel Webster, reflected the Federalist tradition of support for policies to encourage economic development. In Gibbons v. Ogden (1824), the court struck down a New York state law of 1808 that had granted a monopoly to a company to operate steamboats on the Hudson River and in all of the state’s waterways. As steamboat technology became more widespread, a second company wanted to compete in the same waterways, and the court agreed that it should be able to do so. The decision struck down the New York monopoly and asserted that the federal government’s commerce clause (C1.8.3) authority to regulate interstate commerce included the authority to regulate navigation on all navigable waters–even if such waters were contained entirely within a state.

The Bank of the United States

At the time the politically most significant battles over federal law and the Supreme Court’s role concerned the Bank of the United States, which was established in 1791 by Alexander Hamilton, then the Secretary of the Treasury, and which operated under an initial twenty-year charter from Congress, until 1811. The bank mixed public and private characteristics and functions. Most of its capital (80%) was private, but it had special privileges as the primary lender to and bank of deposit for the federal government, and its activities were supervised by the US Treasury and Congress. Five of its twenty-five directors were appointed by the federal government. The bank’s head office was in Philadelphia, and there were about eight branches in major cities in other parts of the country.

The bank was very controversial. Both Thomas Jefferson and James Madison opposed it, and it remained unpopular among Democratic-Republicans. Thus when the original charter expired early in the Madison administration (1809-17), it was not renewed. However, the lack of such a bank made it much more challenging for the government to finance the War of 1812 and to pay the country’s debts after the war. Thus Congress, with Madison’s reluctant support, granted a new charter for the “Second” Bank of the U.S., which also ran for twenty years, from 1816 to 1836.

The state of Maryland tried to shut down the operation of the bank on its territory by taxing it. In the case of McCulloch v. Maryland (1819), the Supreme Court struck down the state law that created this tax (see below). Once again, the court followed closely the arguments made by Daniel Webster, attorney for the bank.

In 1832 Congress passed a bill to renew the bank’s charter a third time, but President Andrew Jackson vetoed the “bank bill” (see below). Although the bank’s renewal remained a major issue through the 1832 presidential election, Jackson’s victory meant that when its charter expired in 1836 the bank ceased to operate as before, as the country’s central bank.

Further reading: for summaries of the above cases, with links to the decisions, see the Oyez website, and then search by the case’s name. On the Bank of the US, see the Federal Reserve’s pages on: the First Bank of the United States; and the Second Bank of the United States.