Danbury Hatters Decision Constrains Secondary Boycotts

Date February 3, 1908

The U.S. Supreme Court’s decision subjecting a trade union’s secondary boycott to prosecution under the Sherman Antitrust Act imperiled the existence of all labor unions.

Also known asLoewe v. Lawlor

Locale Danbury, Connecticut; Washington, D.C.

Key Figures

• Melville W. Fuller (1833-1910), chief justice of the United States, 1888-1910
• Samuel Gompers (1850-1924), president of the American Federation of Labor
• William Howard Taft (1857-1930), chief justice of the United States, 1921-1930
• Theodore Roosevelt (1858-1919), president of the United States, 1901-1909

Summary of Event

On February 3, 1908, Chief Justice Melville W. Fuller, a lifelong Democrat and President Grover Cleveland’s appointee to the U.S. Supreme Court, delivered the Court’s unanimous opinion in the case of Loewe v. Lawlor, soon dubbed the Danbury Hatters case. Along with all other American labor leaders, Samuel Gompers, president of the American Federation of Labor (AFL), the nation’s largest trade union, awaited the Court’s ruling with apprehension. Organized labor was under widespread assault from the business community and had already suffered reversals in several lower federal court rulings. Union leaders consequently anticipated that any Supreme Court decision would be significant. The Danbury Hatters ruling was epochal, but it also realized all of their fears. The Court declared illegal a secondary boycott mounted by the Danbury, Connecticut, United Hatters of North America against nonunion hat manufacturers. The Court did so by bringing trade unions under provisions of the Sherman Antitrust Act of 1890.

The Sherman Act was a response to public reactions against the proliferation of trusts and monopolies spawned by the unprecedented expansion of industrial and finance capitalism in the United States after 1880. In effect federalizing legislation previously enacted in many states, the Sherman Act sought to maintain competition in the marketplace by prosecuting conspiracies that were judged to be in restraint of trade or commerce. Until the administration of President Theodore Roosevelt, the act, appearing toothless, was seldom employed. Roosevelt sensationalized the act by launching and winning several major trust prosecutions, but during the act’s first eighteen years the Supreme Court limited its jurisdiction to cases involving business or industrial combinations.

Never, until 1908, had the Court indicated that the act also applied to the country’s trade unions, although lower courts had invoked it to justify injunctions issued in the celebrated case involving labor leader Eugene V. Debs in 1895. Unions feared that if they were subjected to the Sherman Act and exposed to charges that they conspired to restrain trade, then the full gamut of trade union weaponry—propaganda, organizing campaigns, picketing, walkouts, strikes, and boycotts—could be cast aside as illegal. It was a reasonable presumption in these circumstances that the American organized labor movement faced extinction.

The Danbury Hatters’ Union was interested in one kind of restraint of trade. The union asserted jurisdiction over the country’s eighty-two major manufacturers of felt hats. By 1908, in some instances through collusion with manufacturers themselves, the Danbury Hatters had unionized seventy of these firms. In the course of trying to bring the closed shop—a workplace that hires only union members—to the holdout companies, the Hatters had initiated a series of strikes, one of them in 1901 against Dietrich E. Loewe’s Danbury hat factory.

When the Loewe strike eventually failed, the union tried another tack. With additional assistance from the AFL, its affiliates, and a number of local unions, the Hatters called on members and the general public to boycott Loewe’s products, the bulk of which were shipped out of Connecticut to twenty-eight other states. The union branded Loewe’s firm as “unfair,” urging merchants and the public to cease purchasing Loewe hats. To lend substance to their campaign, the Hatters likewise threatened similar boycotts—called secondary boycotts—against dealers who refused to aid them in their fight against Loewe.

The union’s nationwide boycott succeeded in reducing Loewe’s sales significantly. In 1903, having meanwhile secured the covert aid of the business-funded American Anti-Boycott Association, Loewe filed two suits against individual members of the Danbury Hatters’ Union, including Martin Lawlor. Filing suit against individuals rather than against the union was a legal innovation. Both suits sought redress for Loewe under the Sherman Antitrust Act. One claimed the triple damages the act allowed, amounting to $240,000. The other charged union members with engaging in a criminal common-law conspiracy to interfere, by means of their secondary boycott, with interstate commerce. Loewe claimed losses as a consequence of interference with his shipments of goods from as well as into Connecticut. This involvement of interstate commerce allowed the Court to find jurisdiction under the commerce clause of the U.S. Constitution and authority to apply the Sherman Act.

Whether the Sherman Act applied to organized labor had been debated since its enactment. Seven cases invoking the Sherman Act against labor, all prosecuted by railroad companies, had been heard by lower federal courts by 1895. It was in one of these cases that the Supreme Court found its precedent for doing likewise. It therefore accepted Loewe’s contention that the stoppage of his orders outside Connecticut, in addition to union interference with his ability to fill orders within the state, constituted a restraint of trade or commerce under the meaning of section 1 of the Sherman Act. On this basis, the Court declared the Danbury Hatters’ boycott illegal while simultaneously awarding Loewe his damages. Secondary boycotts would remain illegal for the next six decades.

Significance

Controversial even in 1908, the U.S. Supreme Court’s decision to subject the Danbury Hatters’ Union to the Sherman Act has remained so among legal scholars. Few would deny the Court’s power to employ the act, but most would agree that in so doing the justices engaged in their own brand of legal artistry. The intent of Congress, as made clear in congressional discussions and debates, was that the Sherman Act be aimed at the practices of the then much-feared industrial combinations rather than at labor unions. Industrial combinations continued to be targeted by antitrust prosecutions throughout the twentieth century.

It appears to most legal scholars that common-law prohibitions against restraint of trade and commerce were applied erroneously by the Court in the Danbury Hatters case. The language of the Sherman Act is broad, but legal authorities generally agree that the act’s phraseology was not intended by Congress to apply to interference with interstate commerce. In effect, the Court assumed virtual powers of legislation and in so doing exercised judicial interference with the development of the nation’s economic policy.

Gompers and other labor leaders, shocked and dismayed by the decision, broke with their traditions of political nonpartisanship. After a series of national conferences, they decided to organize politically to reward politicians who favored them and punish those who did not. American labor leaders in this respect were borrowing from the actions of their British counterparts. Following the discriminatory Taff Vale Railway decision (like the Danbury ruling, it had subjected unions to charges of conspiracy and combination), British workers formed the Labour Representation Committee, which soon elected fifty members of Parliament. American labor found ample incentive to follow suit, as the Danbury Hatters decision came almost simultaneously with other foreboding judicial news. In 1905 alone, for example, the Massachusetts Supreme Court rendered an opinion that could have doomed the union shop; a Cincinnati, Ohio, court decision appeared to declare that employers had rights regarding workers similar to rights regarding property; the U.S. Supreme Court ruled in the famous Lochner v. New York case that New York State’s legislative limits on hours of labor were illegal; and a judge in Chicago, Illinois, prevented peaceful picketing or any moral suasion on the part of Typographical Union strikers to bring nonunion workers into their fold.

A little more than a week before ruling on Loewe v. Lawlor, the Supreme Court negated the Erdman Act of 1898 in its decision in Adair v. United States. The Adair decision allowed railroad companies to discriminate against their workers because of their union membership. Meanwhile, the nation’s courts continued employing blanket injunctions against labor’s use of its principal weapons: picketing, striking, propagandizing, and boycotting. President Roosevelt publicly proclaimed it unwise to inhibit the judiciary’s authority in this regard.

Organized labor’s subsequent efforts and, just as important, the inauguration of President Woodrow Wilson’s sweeping reform administration contributed to passage of the Clayton Antitrust Act of 1914, hailed as labor’s Magna Carta. The Clayton Act was designed in part to amend the Sherman Act by acknowledging the right of unions to exist, with federal recognition of their additional right to picket or strike peacefully. Secondary boycotts remained illegal. Although union leadership hailed the Clayton Act as exempting unions from the force of the Sherman Act, the amending act changed little. The Supreme Court demonstrated this in 1921 in Duplex Printing Press Company v. Deering by confirming a lower court’s restraining order against Duplex strikers as well as by limiting the strike to Duplex’s Michigan plant, thereby condemning sympathetic strikes or threats of strikes or boycotts by unionists in New York State.

Disappointing as the Danbury Hatters decision was to labor leaders, by the early 1920’s trade unions were established as one of the tenacious realities of industrial life. It is therefore of interest that a lifelong Republican and conservative former U.S. president, William Howard Taft, delivered an opinion as chief justice of the United States in the United Mine Workers v. Coronado Coal Company case of 1922. The decision offered labor distant hope by skirting allegations that a mine workers’ strike had so interfered with interstate commerce as to subject the union to the Sherman Act. Taft implicitly acknowledged that by the 1920’s nearly all union actions affected interstate commerce, and that to decide against unions on this basis would strip them entirely of their weaponry. This was not a viable course, either socially or politically. The Court’s determination that there had been only an indirect restraint of interstate commerce, restraint insufficient for the Court to apply the Sherman Act, strengthened the cause of labor, although the Court condemned use of the boycott.

Congress confirmed the swing in attitude in favor of labor with the reforms embodied in the Norris-La Guardia Act of 1932 and the National Labor Relations Act of 1935. Continuing in heated legal and political debate, however, was the issue of whether the nation’s antitrust laws ought to apply to organized labor and, if so, in what ways.

Bibliography

Foner, Philip S. The Policies and Practices of the American Federation of Labor 1900-1909. Vol. 3 in History of the Labor Movement in the United States. New York: International Press, 1964. Scholarly and substantive, with a strong prolabor bias. Provides excellent discussion of organized labor’s views of the Sherman Act as used by employers and the federal government. Extremely interesting and informative on the Danbury Hatters decision and its context. Extensive endnotes and splendid index.

Gregory, Charles O. Labor and the Law. New York: W. W. Norton, 1946. Intelligently interpretive synthesis by a noted law professor. Good pithy reading with appropriate insertions of the author’s views on the Danbury Hatters case and related decisions involving applications of the Sherman Act to labor. Includes two appendixes, reference notes, a table of authorities (list of cases cited), and an index. A fine read not yet out of date on basic issues.

Millis, Harry A., and Royal E. Montgomery. Organized Labor. New York: McGraw-Hill, 1945. Continues to stand the test of time. The authors were outstanding economists and public servants. Rich in overviews and detail. Excellent on the Danbury Hatters case and others under the Sherman Act. Abundant informative notes and fine index.

Minda, Gary. Boycott in America: How Imagination and Ideology Shape the Legal Mind. Carbondale: Southern Illinois University Press, 1999. Examines the history, legal interpretation, and understanding of boycotts in the United States, approaching the subject from the viewpoints of labor, antitrust, and constitutional law.

Peritz, Rudolph J. R. Competition Policy in America: History, Rhetoric, Law. Rev. ed. New York: Oxford University Press, 2001. Explores the influences on U.S. public policy of the concept of free competition. Discusses congressional debates, court opinions, and the work of economic, legal, and political scholars in this area.

Seager, Henry R., and Charles A. Gulick, Jr. Big Business: Economic Power in a Free Society. New York: Harper & Brothers, 1929. Authoritative and detailed account, excellent on applications of the Sherman Act. Notes, bibliography, and index are all extensive.

Thorelli, Hans B. The Federal Antitrust Policy: Origination of an American Tradition. Baltimore: The Johns Hopkins University Press, 1955. One of the most detailed works on the subject. Best used selectively. Essential but dense reading that reflects confusions of antitrust policies themselves. Extensive notes, seven appendixes, exhaustive bibliography, lengthy table of cases, and detailed index.

Wilcox, Clair. Public Policies Toward Business. 3d ed. Homewood, Ill.: Richard D. Irwin, 1966. One of the finest syntheses of its kind. Wonderful context for the Sherman Act’s applications to business and labor. Indexes of cases, names, and subjects are all excellent.