402 U.S. 146 (1971), 600, Perez v. United States

Docket Nº:No. 600
Citation:402 U.S. 146, 91 S.Ct. 1357, 28 L.Ed.2d 686
Party Name:Perez v. United States
Case Date:April 26, 1971
Court:United States Supreme Court

Page 146

402 U.S. 146 (1971)

91 S.Ct. 1357, 28 L.Ed.2d 686



United States

No. 600

United States Supreme Court

April 26, 1971

Argued March 22, 1971




Petitioner was convicted of "loansharking" activities, i.e., unlawfully using extortionate means in collecting and attempting to collect an extension of credit, in violation of Title II of the Consumer Credit Protection Act, and his conviction was affirmed on appeal. He challenges the constitutionality of the statute on the ground that Congress has no power to control the local activity of loansharking.

Held: Title II of the Consumer Credit Protection Act is within Congress' power under the Commerce Clause to control activities affecting interstate commerce, and Congress' findings are adequate to support its conclusion that loansharks who use extortionate means to collect payments on loans are in a class largely controlled by organized crime with a substantially adverse effect on interstate commerce. Pp. 149-157.

426 F.2d 1073, affirmed.

DOUGLAS, J., delivered the opinion of the Court, in which BURGER, C.J., and BLACK, HARLAN, BRENNAN, WHITE, MARSHALL, and BLACKMUN, JJ., joined. STEWART, J., filed a dissenting opinion, post, p. 157.

DOUGLAS, J., lead opinion

MR. JUSTICE DOUGLAS delivered the opinion of the Court.

The question in this case is whether Title II of the Consumer Credit Protection Act, 82 Stat. 159, 18 U.S.C. § 891 et seq. (1964 ed., Supp. V), as construed and applied to petitioner, is a permissible exercise by Congress of its powers under the Commerce Clause of the Constitution.

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Petitioner's conviction after trial by jury and his sentence were affirmed by the Court of Appeals, one judge dissenting. 426 F.2d 1073. We granted the petition for a writ of certiorari because of the importance of the question presented. 400 U.S. 915. We affirm that judgment.

Petitioner is one of the species commonly known as "loansharks" which Congress found are in large part under the control of "organized crime."1 "Extortionate credit transactions" are defined as those characterized by the use or threat of the use of "violence or other criminal means" in enforcement.2 There was ample evidence showing petitioner was a "loanshark" who used the threat of violence as a method of collection. He loaned

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money to one Miranda, owner of a new butcher shop, making a $1,000 advance to be repaid in installments of $105 per week for 14 weeks. After paying at this rate for six or eight weeks, petitioner increased the weekly payment to $130. In two months, Miranda asked for an additional loan of $2,000, which was made, the agreement being that Miranda was to pay $205 a week. In a few weeks, petitioner increased the weekly payment to $330. When Miranda objected, petitioner told him about a customer who refused to pay and ended up in a hospital. So Miranda paid. In a few months, petitioner increased his demands to $500 weekly, which Miranda paid, only to be advised that, at the end of the week petitioner would need $1,000. Miranda made that payment by not paying his suppliers; but, faced with a $1,000 payment the next week, he sold his butcher shop. Petitioner pursued Miranda, first making threats to Miranda's wife and then telling Miranda he could have him castrated. When Miranda did not make more payments, petitioner said he was turning over his collections to people who would not be nice but who would put him in the hospital if he did not pay. Negotiations went on, Miranda finally saying he could only pay $25 a week. Petitioner said that was not enough, that [91 S.Ct. 1359] Miranda should steal or sell drugs if necessary to get the money to pay the loan, and that, if he went to jail, it would be better than going to a hospital with a broken back or legs. He added, "I could have sent you to the hospital, you and your family, any moment I want with my people."

Petitioner's arrest followed. Miranda, his wife, and an employee gave the evidence against petitioner, who did

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not testify or call any witnesses. Petitioner's attack was on the constitutionality of the Act, starting with a motion to dismiss the indictment.

The constitutional question is a substantial one.

Two "loanshark" amendments to the bill that became this Act were proposed in the House -- one by Congressman Poff of Virginia, 114 Cong.Rec. 1605-1606, and another one by Congressman McDade of Pennsylvania. Id. at 1609-1610.

The House debates include a long article from the New York Times Magazine for January 28, 1968, on the connection between the "loanshark" and organized crime. Id. at 1428-1431. The gruesome and stirring episodes related have the following as a prelude:

The loanshark, then, is the indispensable "moneymover" of the underworld. He takes "black" money tainted by its derivation from the gambling or narcotics rackets and turns it "white" by funneling it into channels of legitimate trade. In so doing, he exacts usurious interest that doubles the black-white money in no time; and, by his special decrees, by his imposition of impossible penalties, he greases the way for the underworld takeover of entire businesses.

Id. at 1429.

There were objections on constitutional grounds. Congressman Eckhardt of Texas said:

Should it become law, the amendment would take a long stride by the Federal Government toward occupying the field of general criminal law and toward exercising a general Federal police power, and it would permit prosecution in Federal as well as State courts of a typically State offense.

* * * *

I believe that Alexander Hamilton, though a federalist, would be astonished that such a deep entrenchment on the rights of the States in performing

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their most fundamental function should come from the more conservative quarter of the House.

Id. at 1610.

Senator Proxmire presented to the Senate the Conference Report approving essentially the "loanshark" provision suggested by Congressman McDade, saying:

Once again, these provisions raised serious questions of Federal-State responsibilities. Nonetheless, because of the importance of the problem, the Senate conferees agreed to the House provision. Organized crime operates on a national scale. One of the principal sources of revenue of organized crime comes from loansharking. If we are to win the battle against organized crime, we must strike at their source of revenue and give the Justice Department additional tools to deal with the problem. The problem simply cannot be solved by the States alone. We must bring into play the full resources of the Federal Government.

Id. at 14490.

The Commerce Clause reaches, in the main, three categories of problems. First, the use of channels of interstate or foreign commerce which Congress deems are being misused, as, for example, the shipment of stolen goods (18 U.S.C. §§ 2312-2315) or of persons who have been kidnaped (18 U.S.C. § 1201). Second, protection of the instrumentalities of interstate commerce, as, for example, the destruction of an aircraft (18 U.S.C. § 32), or persons or things in commerce, as, for example, thefts from interstate shipments (18 U.S.C. § 659). Third, those activities affecting commerce. It is with this last category that we are here concerned.

Chief Justice Marshall, in Gibbons v. Ogden, 9 Wheat. 1, 195, said:

The genius and character of the whole government seem to be that its action is to be applied to all the external concerns of the nation, and to

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those internal concerns which affect the States generally, but not to those which are completely within a particular State, which do not affect other States, and with which it is not necessary to interfere for the purpose of executing some of the general powers of the government. The completely internal commerce of a State, then, may be considered as reserved for the State itself.

Decisions which followed departed from that view; but, by the time of United States v. Darby, 312 U.S. 100, and Wickard v. Filburn, 317 U.S. 111, the broader view of the Commerce Clause announced by Chief Justice Marshall had been restored. Chief Justice Stone wrote for a unanimous Court in 1942 that Congress could provide for the regulation of the price of intrastate milk, the sale of which, in competition with interstate milk, affects the price structure and federal regulation of the latter. United States v. Wrightwood Dairy Co., 315 U.S. 110. The commerce power, he said,

extends to those activities intrastate which so affect interstate commerce, or the exertion of the power of Congress over it, as to make regulation of them appropriate means to the attainment of a legitimate end, the effective execution of the granted power to regulate interstate commerce.

Id. at 119.

Wickard v. Filburn, 317 U.S. 111, soon followed, in which a unanimous Court held that wheat grown wholly for home consumption was constitutionally within the scope of federal regulation of wheat production because, though never marketed interstate, it supplied the need of the grower which otherwise would be satisfied by his purchases in the open market.3 We said:

[E]ven if appellee's activity be local, and though it may not be regarded as commerce, it may still,

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whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce, and this irrespective of whether such effect is what might at some earlier time have been defined as "direct" or "indirect."

317 U.S. at...

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