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STATE AND FEDERAL
CONTROL OF
CARRIERS
A paper read before the Kansas
State Bar Association at Its Annual
Meeting at Topeka, Kansas, Jan¬
uary 27th, 1916, by
EDWARD J. WHITE
bit- iis~i
1716»
Vi/6"?
STATE AND FEDERAL
CONTROL OF
CARRIERS
A paper read before the Kansas
State Bar Association at Its Annual
Meeting at Topeka, Kansas, Jan¬
uary 2 7th, 1916, by
EDWARD J. WHITE
•i
State and Federal Control of
Carriers
The legal problems that confront the carriers of our country, and
the laws and decisions that make for the prosperity or destruction of
these necessary arteries of commerce, are of vital interest to our pro¬
fession.
It is a mistaken idea that the general practitioner should take no
interest in such discussions. A great mass of our citizenship is directly
or remotely interested in the proper management and control of com¬
mon carriers, and thousands of interdependent industries are likewise
affected thereby.
The State and Federal Governments, in their dual capacities, have,
of recent years, taken over the control and regulation of common car¬
riers, and they are thus directly concerned in securing the most scien¬
tific laws for the regulation of carriers, since the development of the
resources of the State and Nation and the commercial prosperity of
our people are largely dependent thereon.
Clearly, then, that which is of such vital importance to our country
necessarily concerns the lawyer, for he is interested in all governmental
questions.
I would, therefore, present this subject exactly as a member of this
association would discuss a question upon which he had formed con¬
clusions while representing a client, whose personal or property rights
are vital to the State.
It is not with the rights of the shareholders or security holders of
these quasi-public companies, as opposed to the right of the State or
Federal Government to regulate and control these privately owned
properties, that we shall concern ourselves, since this discussion would
be purely academic at the present day.
Nor shall we enter the broad field of legal learning to consider, under
our basic organic system, whether the foundations for such a fourth
department of government, known as "Government by Commission",
which is not judicial, legislative or executive, yet limits and controls
the rights of property, were wisely or legally laid beside the beneficent
institutions of our Constitutional Government (1). Our ship of state
has been launched upon the uncertain sea of Commission Government,
where the waves of passion and prejudice at times may be unmindful
of individual right, but, having embarked, the voyage must be made.
Omitting from the discussion, therefore, the idea of the sacrifice
of individual right from such a system of government and the consti¬
tutional right or power, according to our principles of government, to
enter upon such a policy, confining the discussion alone to the interest
of the people served by these privately owned State and Government
controlled agencies of commerce, let us see if the present system is
along scientific lines.
If the present State and Federal control and regulation of carriers
result in conflicts and inconsistencies, with resulting penalties and
burdens, which injuriously affect the service, these State and Federal
controlled agencies of transportation are able to render the people, then
there is something radically wrong with the system.
Organized originally to preserve the public interest, through the
control and regulation of these public service corporations whose gen¬
eral conduct, by public statutes, the legislatures were unable to properly
regulate and control, since the establishment of Commission Govern¬
ment, the passing years have brought such a mass of inconsistent and
(l)"In spite of the judicial bulwark there lurks a real danger in the exist¬
ence and operation of this fourth department of government, for in democ¬
racies there is a consistent distrust of officials who are outside of popular
control, and commissions appointed by the executive for definite terms, and
removable only by him upon charges, are not responsible to the body from
which they get their power or to the people." (See article "Government by
Commission", by Lindsay Rogers, 21 "Case and Comment", No. 11, p. 907,
April, 1915.)
2
conflicting legislation and burdens (2) that railroad receiverships have
become the order of the day, and financial ruin to the carriers and
their interdependent industries, with increasing inability to render the
service demanded by the public, has resulted.
This deplorable condition of the interstate carriers in the United
States is due largely to the fact that they have had to meet, at one and
the same time, not only the two conflicting legislative theories of unre¬
lated and opposite character, of the State and Federal Governments,
but they have, at the same time, been "bound and controlled by the
inconsistent and conflicting laws, rules and orders of the various States
through which the lines of railroads run, while primarily obligated to
obey the lawful orders of the Interstate Commission. The applica¬
tion, at the same time, of such opposite and conflicting theories of
supervision must ultimately lead to Government ownership or exclusive
Federal control of these interstate agencies of commerce, if their serv¬
ice and usefulness to the people is to be maintained (2a).
I have always been a firm believer in what is popularly termed
"State's Rights", and have been thoroughly grounded in the principle
that the power resides in the several States, when not forbidden by
the Constitution, to regulate and control, by law, the relative rights
and duties of all persons and corporations within the State, and
thereby to provide for the public convenience and the good of
society (8).
(2)"The State of New York was the pioneer, establishing a railroad com¬
mission in 1855. Massachusetts followed in 1869, but the former experiment
was unsuccessful. In New York, however, the problem was most acute, as
is natural by reason of the services necessary for the congested population,
and the State was the first to begin commission regulation upon an extensive
scale. Wisconsin acted at the same time (1907), but the New York law, as
amended in 1910, 1911 and 1912, probably delegates most comprehensive
powers, the commission being authorized to regulate rates and service, to
make investigations, require reports on business conditions", etc. Article by
Lindsay Rogers, "Government by Commission", supra,
(2a)There are now 41,988 miles of railroad in the United States in the
hands of receivers, representing a total funded debt of $1,475,385,755.00.
(Railway Age Gazette, October 15th, 1915, Vol. 59, No. 15, p. 676.)
(3)Lake Shore vs. Ohio, 173 U. S. 285; 43 L. Ed. 702.
3
-, /.Have, personally,. always viewed with alarm any encroachment by
•the Federal Government upon this constitutional power of the States.
•However, have long since learned that, to give due effect to our Con¬
stitution, when the State police power and the Federal commercial
power come in conflict, the State power, under the organic law, must
yield, for, otherwise, we could not have a Federal Government at all,
if the various States could set at naught its constitutionally delegated
power (4).
This naturally suggests the question : What is the source of power
of the respective Federal and State governments over carriers ?
Section 8, Article I, of the Constitution of the United States grants
to Congress the power
"to regulate commerce with foreign nations and among the several
States".
Section 2, Article VI, of the Federal Constitution, provides that
"This Constitution and the laws of the United States which
shall be made in pursuance thereof * * * shall be the supreme
law of the land, and the judges in every State shall be bound
thereby, anything in the constitution or laws of any State to the
contrary notwithstanding."
By the Tenth Amendment to the Federal Constitution,
"The powers not delegated to the United States by the Consti¬
tution, nor prohibited by it to the States, are reserved to the
States, respectively, or to the people."
Under these constitutional provisions, while the Federal Govern¬
ment exercises delegated power only over carriers engaged in inter¬
state commerce, in the exercise of such power it is supreme, and the
power of the several States, as to any of the powers delegated to Con-
(4) Arkansas vs. K. & T. Coal Co., 183 U. S. 185: 46 L. Ed. 144.
4
gress, depends upon whether Congress has exercised the power so
delegated.
In the exercise of their respective powers over carriers, both the
Federal and State Governments are limited by the provisions of the
Fifth and Fourteenth Amendments to the Constitution, guaranteeing
due process of law in the protection of life, liberty or property, and
preventing the taking of private property for public use without just
compensation.
These provisions of the Constitution furnish the basis for the con¬
trol by the courts of the unbridled power on the part of the commis¬
sions, State and Federal (5).
While the United States Supreme Court recognizes the right of the
several States, under the Constitution, to regulate the charges of
public service companies (6), the courts not only hold that it is within
the judicial power, but a duty of the courts, to restrain anything which,
in the form of a regulation of rates, operates to deny to the owners
of property invested in the business of transportation that equal pro¬
tection of the laws which, by the Fourteenth Amendment, no State
can deny to any citizen (7).
The ill-advised and extreme legislation of the various States against
carriers has caused the Federal courts, in many cases, to apply the
constitutional guaranty to the owners of property devoted to the busi¬
ness of transportation, and the wholesome tendency of the United
States Supreme Court seems to be in the direction that interstate car¬
riers must, in substantial respects, be subject to but one power, and
that regulations of intrastate commerce, which have the immediate
(5)See Article, "Judicial Control of Commissions", by Lawrence B. Evans,
21 "Case and Comment", No. 11, p. 895.
(6) Atlantic Coast Line R. Co. vs. N. C. Com., 206 U. S. t ; 51 L. Ed. 933.
(")See Justice Brewer's Opinion in Regan vs. Farmer's Loan & Trust Co.,
154 U. S. 362; 38 L. Ed. 1014; 4 I. C. C. Rep. 560; 14 Sup. Ct. Rep. 1047.
5
or indirect effect of imposing a burden upon interstate commerce, are
inconsistent with the power delegated to Congress by the Constitu¬
tion (8).
The Supreme Court of the United States, in construing the Inter¬
state Commerce Act (9), in the case of Texas & Pacific R. R. Co. vs.
Interstate Commerce Commission, said:
"It would be difficult to use language more unmistakably signi¬
fying that Congress had in view the whole field of commerce
(excepting commerce wholly within a State), as well that
between the States and Territories, as that going to or coming
from foreign countries.
"In a later part of the section it is declared that 'the term
transportation shall include all instrumentalities of shipment or
carriage.'
"It has thus included in its scope the entire commerce of the
United States, foreign and interstate, and subjected to its regula¬
tions all carriers engaged in the transportation of passengers or
property, by whatever instrumentalities of shipment or carriage."
In the case of
New York Central R. R. vs. Hudson County, 227 U. S. 248,
it was said:
"An assertion of power by Congress over a subject within its
domain must be treated as coterminous with its authority over the
subject, and leaves no element of the subject to control of the
State."
"The operation at one time of both the power of Congress and
that of the State over a matter of interstate commerce is incon-
(8)Chicago, etc., Ry. Co. vs. Iowa, 233 U. S. 334.
Robbins vs. Taxing District, 120 U. S. 489; 30 L. Ed. 694; 162 U. S. 197;
40 L. Ed. 945.
(9)Sec. 8563, Vol. IV, U. S. Comp. St. 1913. And see Houston Ry. Co.
vs. United States, 234 U. S. 341;.58 L. Ed. 1341.
6
ceivable; the execution of the greater power takes possession of
the field and leaves nothing upon which the lesser power can
operate."
In the case of
Erie R. R. Co. vs. New York, 233 U. S. 671,
it was said :
"When Congress acts in such manner as to manifest its consti¬
tutional authority in regard to interstate commerce, the regulating
power of the State ceases to exist, and if there is conflict between
State and Federal legislation, the former must give way. After
Congress acts on a matter within its exclusive jurisdiction, there
is no division of the field of regulation."
As recently shown in an excellent paper before the Tennessee State
Bar Association (10), this constitutional right to have an exclusive
regulation of interstate commerce by Congress is a right of the sev¬
eral States to prevent discrimination against the citizens of each, since
it is a matter of supreme importance to each State to prevent any¬
thing calculated to injure its trade and commerce or to paralyze the
industrial development of the State.
The constitutional power was lodged in Congress to overcome the
greed and selfishness of the various individual States, in the race for
commercial supremacy, following the Revolutionary War, when Vir¬
ginia, by her export duties and inspection laws, sought to keep her
tobacco at home ; Massachusetts prohibited the exportation of grain
and leather; New York, by her import duties, sought to exclude the
firewood from Connecticut and the butter and dairy products from
New Jersey; and these and various other States, by a narrow system
of local retaliatory laws regulating various articles of commerce, mate¬
rially retarded the development of the country C11).
(10)See Address of Hon. Alfred P. Thorn before the State Bar Association
of Tennessee, June 25th, 1915, at Chattanooga.
(ib)Fiske's "Critical Period of American History", p. 144,
7
When adopted originally, to prevent the serious results of sectional
strife, this salutary constitutional provision is certainly broad enough
to prevent a similar result of such ill-advised State legislation as now .
threatens to destroy the usefulness of the country's interstate trans¬
portation system.
It is of. the greatest practical importance to maintain an adequate
and efficient transportation agency, and any policy of legislation or
regulation that fails to preserve the continuity of the service of the
carriers of the country is at variance with the fundamental reasons
which gave rise to the lodgment of the constitutional power in Con¬
gress regarding commerce.
Just as it was originally essential to adopt a provision of organic
law to protect the commerce of the country from ill-advised laws of
the several independent and sovereign States, and, later, an act of
Congress, to render more efficient to the public the service of interstate
carriers, so it is now essential that the efficiency of this service shall
not be destroyed by the imposition of burdens which must eventually
bankrupt such agencies of transportation, but that they shall be pre¬
served from the legislation of States which reduce rates below the
fair cost of transportation for the benefit of their own citizens, or laws
intended solely to preserve the local markets for State trade, thus
discriminating against the citizens of adjoining States and interfering
with the efficiency of the agencies of transportation by demanding
service at less than its actual cost.
If the efficiency of the service and the financial responsibility of
interstate carriers is to be left to State regulation, then each of the
several States can and will establish a standard all its own and the
service of the other States and the success of a financial plan that
may meet with the approval of a majority of the States through which
a line of road is built can be jeopardized or set aside by the action of
any one State.
8
Every bond issue, for instance, of companies engaged in interstate
commerce must meet the approval of the commissions of the different
States through which the railroad runs, and different fees for the
required authority to issue such negotiable instruments must be paid
upon the total issue in all the States, where such legal requirements
obtain.
Thus, the Illinois Utility Act (12) provides that
"All stock * * * and every bond, note or other evidence of
indebtedness * * * issued without an order of the Commission
authorizing the same then in effect shall be void", etc.
That this Act, requiring the financial indebtedness which has the
approval of the State of the domicile of the carrier to be approved by
another State at the price of the fees to be paid, under the law, or
suffer the penalty of having the lien upon the property and contract
of the foreign State voided, denies full faith and credit to the Acts
of the sister State and imposes a direct burden upon interstate com¬
merce, I have no doubt (13), yet it is but one of many similar Acts
upon the statute books.
The financial responsibility and the legality of the commercial paper
of a carrier, whose lines of road extend through many States, are
matters of most vital concern to the citizens of all such States which
should not be left to the determination of the legislatures of any one
of such States or to the whim or caprice of any State Commission (14).
If such important contract rights as these can be stricken down,
unless the fiat of a given State Commission is procured, then the
(12)Section 23, Illinois Utility Act of 1913.
(13)Laird vs. B. & O. R. Co., 131 Md. 179; 88 Atl. Rep. 348.
Western Union Co. vs. Kansas. 216 U. S. 1.
Canada Southern R. Co. vs. Gebhard, 109 U. S. 527.
(14)"And yet sixteen States have enacted statutes, each asserting for itself
the individual right to control the issue of stocks and bonds of interstate
carriers." (Paper of Hon. Alfred P. Thom before Tennessee Bar Associa¬
tion, June 25th, 1915, at Chattanooga.)
9
sacred right of contract, guaranteed by Section 10, Article I, of the
Constitution, and the full faith and credit clause of Section 1, Article
IV, of this immortal document, are but high-sounding phrases.
Space will only permit the mention of a few of the many State laws
and regulations which discriminate against the commerce of the other
States or against interstate commerce.
Although the Interstate Commerce Commission has provided for
no penalty for a delay in furnishing freight cars, the laws of many
of the different States prescribe penalties ranging from a dollar a day
to several dollars a day for failure to furnish such cars. Thus, in
times of a car shortage, to avoid the penalty, the carrier would be
compelled to favor the most prejudiced or unreasonable State because
no disinterested authority is provided for the regulation of the distri¬
bution of cars.
Although Congress has enacted an adequate and reasonable Hours
of Service Act and Safety Appliance Act, many of the States have
passed similar laws, with different hours of service for employees
engaged in the operation of trains and additional safety provisions
from those required by the Federal law.
Although it is to the interest of the general public to have cars and
engines repaired where the most efficient work can be obtained, sev¬
eral States- have passed laws attempting to compel carriers, who have
shops in such States, to have all cars and engines repaired inside the
State.
By the decisions of some of the States, a carrier is liable for a few
hours' delay in failing to deliver livestock in time for the early morning
market (15), while, under the decision of the United States Supreme
Court, the payment of a claim based upon such a delay, in the face of
the provisions in the Uniform Livestock Contract, would constitute
an unlawful discrimination (16).
(15)Anderson vs. Ry. Co., 93 Mo. App. 677.
Lay vs. R. R., 157 Mo. App. 474.
(16)Chicago & Alton R. R. Co. vs. Kirby, 225 U. S. 155; 56 L. Ed. 1033.
10
Upon beneficent considerations of humanity, Congress, by the Fed¬
eral Employers' Liability Act of 1908, and the amendment of 1910,
has provided for the compensation for injuries or death of employees
of carriers, engaged in interstate commerce, under the broad grant of
power conferred by the Constitution to regulate commerce. A differ¬
ent measure of damages in case of death and a different procedure
for the computation of damages for injuries than obtain in most of the
States are established by this law, which have given rise to innumerable
conflicts with the courts of the different States. Of course, having
acted upon the subject, the Act of Congress is exclusive in actions by
interstate employees, but the conflicts between the two jurisdictions are
a source of no little concern to the interstate carrier (17).
The utter impracticability and destructive policy of the present dual
system of regulation of interstate carriers is best illustrated, however,
in the efforts on the part of the carriers to procure sufficient revenue to
meet the fixed charges necessary to give the service required by the
public.
Although created, among other things, to perform impartially the
duty of fixing reasonable intrastate rates, some of the various State
Commissions have not only consistently and arbitrarily refused to
grant reasonable increases asked in State rates, but have conceived it
to be within the line of their duty to defend, through their representa¬
tives, in the name of the people of the State, all efforts on the part
of the carriers to secure reasonable increases in interstate rates. (18).
It is clearly a misconception of the duty of a State Commission to
assume that they were created to appear in the role of counsel against
the carriers in another forum where they are seeking relief, yet we find
(it)See Roberts' "Federal Employers' Liability Act".
Recent paper by Hon. Jacob Trieber before Arkansas State Bar Asso¬
ciation, 49 American Law Review, p. 481.
(18)35 I. C. C. Rep. 498-501.
11
the records of the Interstate Commerce Commission replete with in¬
stances where State Commissions have so recorded themselves (19).
■
In the most recent of these cases before the Interstate Commerce
Commission, where some of the Western State Commissions appeared,
by their representatives, to oppose the increases asked by the carriers,
the argument was advanced that the increases should be refused
because the interstate rates were already higher than the State rates,
although the revenue realized on both classes of business showed a
loss to the carriers (20).
«
It was shown in this case that, of the eleven two-cent passenger fare
States in the United States, while the railroads enjoyed less advan¬
tages and received the lowest passenger fares of any section of the
country, the nine Western two-cent fare States of Illinois, Michigan,
Wisconsin, Minnesota, Iowa, Nebraska, Missouri, Oklahoma and Kan¬
sas were, comparatively, the most prosperous subdivision of agricul¬
tural territory in the United States and the cost of the service to the
carrier was above the average in this section (21).
In the Eastern Advance Rate Case (22), the Interstate Commerce
Commission found that the passenger rates were too low to pay the
cost of the service, yet the average density of population per mile in
these States was 1,036, while, in the nine Western States above re¬
ferred to, the average density of population per mile was only 323.
Upon the reasonableness of the three-cent per mile interstate pas¬
senger rate charged by the carriers in Missouri, Arkansas and Okla¬
homa, the Interstate Commerce Commission recently held, in the case
wherein the Commissions of these States attacked this rate as unrea¬
sonable, that:
(19)Western Advance Rate Case, 35 I. C. C. 498-500.
Eastern Advance Rate Case, 31 J. C. C. 351: 32 I. C. Ç. 343; 24 I. C. C.
380.
Mo., Kan. and Ark. Passenger Rate Case, 22 I. C. C. 160.
(20)Western Advance Rate Case, 35 I. C. C. 668.
(21 )ante idem.
(22)31 I. C. C. 351. - - ,
12
"While the method of estimating values and apportioning cost
and revenues are not accurate, we are satisfied, after a careful
examination of the evidence, that the margin of error which may
be imputed to them is not sufficient to change our conclusion,
which is that, from all the evidence, to base interstate passenger
rates from and to Arkansas, Missouri and Oklahoma on, three
cents a mile does not result in rates that we are convinced are
unreasonable, in violation of the Act to Regulate Commerce.
" * * * \ye ¿o not feej justified in condemning the rates com¬
plained of as unreasonable" (23).
Notwithstanding this decision by the Commission, delegated by
Congress with the duty of regulating commerce between these States,
the discrimination between interstate and State passengers in this
territory and the confiscation of the property of the carriers in these
States in thus being required to furnish transportation at less than cost
have continued.
And not only have these States failed to grant relief against this
condition, which the Federal Commission recommended should be
remedied, but, generally, they have exhibited a tendency to require
unreasonable and extravagant expenditures by the carriers, in the erec¬
tion of expensive passenger stations at relatively small towns, elimina¬
tion of grade crossings, increasing the number of employees upon
trains, and increased passenger trains in sections where the travel did
not justify such service.
In the Minnesota Rate Case, when the same was before the United
States Court of Appeals, Judge Sanborn, answering the argument that
"The reduction of local rates does not interfere with interstate
rates, as a matter of law",
conclusively showed that, while such reduction did not, "as a matter
of law", interfere with interstate rates, yet that it did, as a matter of
fact, have that effect.
(23) Commissions of Oklahoma, Missouri and Arkansas vs. A., T. & S. F.
Ry. Co. et al. (July 18th, 1914), 31 I. C. C. 532.
13
It was conclusively established in the Minnesota Case, and, ever
since, has been a question of which the courts have taken judicial
notice, that the schedules fixed for intrastate transportation necessarily
disturbed the equilibrium existing between State and interstate rates.
All interstate rates naturally embrace the border cities and, when rates
to these cities are included in a general reduction on intrastate rates,
there is, of course, a change in the relation of rates theretofore existing
to adjacent towns across the State line. For instance, a low intrastate
rate to St, Louis, Missouri, would result in a corresponding decrease
in the rate to East St. Louis, Illinois. This, and the general effect
upon interstate rates on given commodities resulting from an unrea¬
sonably low intrastate rate have the natural effect of discriminating
between the rates, interstate and intrastate.
In the recent case involving the validity of the Missouri rate on
grain from various interior points to St. Louis, whore the State rate
was less than the interstate rate, the same conclusion reached by
Judge Sanborn in the Minnesota Rate Case was applied by the Inter¬
state Commerce Commission and it was held that, in the maintenance
of interstate rates higher than the intrastate rates from interior Mis¬
souri points to St. Louis, an unlawful prejudice and advantage was
given to St. Louis and an unjust discrimination was effected against
the interior Missouri cities, East St. Louis and Southern Illinois
- points (24).
The carriers are daily compelled by the different States to continue
equally discriminatory rates in effect which should be remedied by the
same extra-state authority, since the States, for one reason or another,
fail or refuse to remedy.
In States where the intrastate freight and passenger rates are lower
than the interstate rates, the interstate rate is frequently discriminated
against by the quite prevalent custom of "scalping" the interstate rate.
(24)Merchants Exchange vs. B. & O. R. R. Co., 34 I. C. C. 341.
And see Houston R. Co. vs. United States, 234 U. S. 341; 40 L. Ed.
1341.
14
Interstate passengers frequently buy tickets to the last station in the
State, to take advantage of the State rate, and again buy tickets for
the remainder of the interstate journey, and interstate freight is often
billed and rebilled the same way. Of course, this constitutes an unlaw¬
ful discrimination against the interstate rate and the Interstate Com¬
merce Commission has recently so held (25), but the carriers are, them¬
selves, powerless to prevent the practice, and thus discrimination and
confiscation of property continues because of the conflicts in the mat¬
ter of rates between the State and Federal regulating bodies.
•
Another notable conflict between the Federal and State regulation
of carriers arises in the inconsistent provisions regarding the valuation
of the properties of the carriers.
Congress has provided, in what was intended as a very comprehen¬
sive law, for the valuation of the properties of interstate carriers under
certain rules and orders of the Interstate Commerce Commission (26).
Under the supervision of the Interstate Commission, the valuation of
various properties of interstate carriers has been completed at a tre¬
mendous cost to both the Government and the carriers.
Speaking of the comprehensive character of this Federal Valuation
Act, Commissioner Clark, of the Interstate Commerce Commission,
recently said (27) :
"The law which was adopted for this purpose is exhaustive and
requires the performance of a vast amount of detail work and the
determination of many vexed and vastly important questions. No
one has blazed the path. The results ought to be sound, equitable
and right. When these valuations are finally fixed, they will be
of great assistance to the Commission and to the courts in con¬
nection with cases which involve alleged confiscation of property
of carriers."
(23)Kanatex Ref. Co. vs. A., T. & S. F. Rv. Co., 34 I. C. C. 271.
(26)37 U. S. Statutes at Large, eh. 92, p. 701.
(27)Article. "Interstate Commerce Commission and Its Work", Railway
Age Gazette, Sept. 17, 1915, p. 494.
15
But, notwithstanding this work of Federal valuation, carried on in
pursuance of this exclusive power of Congress over Ihe subject of
interstate carriers, the laws and orders of many of the States have
also provided for a separate and distinct valuation of the properties
of interstate carriers, located within the several States, by different
rules and according to various standards of efficiency (28).
Section 20 of the Act to Regulate Commerce prohibits interstate
carriers from keeping any accounts or records other than those ap¬
proved by the Commission, yet, in many States, other and additional
records and accounts are required, as in your State under the Mahin
Act (29). '
Cuspidors, combs and brushes are required by the laws of some
States to be kept in the coaches for the use of the passengers, while
adjoining States make the presence of such articles a violation of law;
different inconsistent provisions exist in adjoining States as to drink¬
ing water and other beverages upon the train, and, in one State, the
carrier is damned if it does, while, in another, it is equally damned if
it doesn't.
If space would permit, we could continue the catalogue of incon¬
sistent State and Federal laws and orders regulating interstate carriers
until your patience was exhausted.
Too frequently the opinion has prevailed with the State regulating
bodies that the right to regulate carries with it the implied obligation
that the regulation shall always be in favor of the patrons of the
regulated agency and against the agency itself. The President of one
State Commission has publicly proclaimed that this is the sole and
sufficient object of State regulation, since the industry to be regulated
is more than able to take care of itself. (30).
(2S)Sec. 28, ch. 238, Laws Kansas, 1911.
(2f>)Kansas Acts, 1913.
(30)Paper of J. M. Eshleman, President, California R. R. Com., 21 Case
and Comment, No. 11, p. 1.
16
• ' When the rights "of the carrier can frequently only be enforced ly
the State Commission, where siich a policy obtains, it must, inevi¬
tably, result in financial ruin, just as the continued and daily loss of
important cases, involving valuable personal or property rights,- must
inevitably produce financial ruin and bankruptcy of the individual
citizen. „ • r,
With such regulation, the railroads, like Micawber, have been forced
to contract obligations, with a view to their immediate liquidation,
which remain unliquidated through their sheer inability to liquidate,
f. The investor in the securities of the carrier and the patrons of the
road are almost as directly interested in the carrier's regulation as the
carrier itself, for the regulation of the business of the carrier will
determine its ability to meet its obligations and render efficient service
to the public (31).
Although the public interest in transportation is that it should be
efficient and adequate, the plain fact remains that a condition now
exists in which almost every burden has been placed upon the trans¬
portation agencies that human ingenuity can devise.
Legislation, in accordance with sound economic principles, formu¬
lated with a due regard to justice and individual right, is what we
should all be striving for. It is high time that the sober common sense
of the American lawyer was aroused upon this subject of State and
Federal regulation of carriers.
It is intolerable that the commerce of the country should be made
to depend upon the whim or caprice of any four or five members of a
State Commission, and it was to remedy this condition that the consti¬
tutional power was lodged in Congress to regulate commerce among
the several States.
What right has an individual State to impose a burden upon inter¬
state commerce, which the people of another State should bear? The
Constitution, itself, reflects the prevalent demand of the people of all
(3l)See Article of H. A. Smith, Vol. 21, Case and Comment, No. 11, p. 879.
17
the States for protection in trade against the barriers imposed by the
individual States, and it is peculiarly a right of the several States to
enjoy this constitutional protection.
The commerce of a country that seeks all markets without regard
to political subdivisions cannot be halted at State lines, either by
physical interruption or inconsistent local regulation. Nor can its
efficiency and usefulness be left to the conflicting views of many mas¬
ters with differing sentiments of public policy and varying conceptions
of the problems presented.
The interest which demands that the transportation facilities shall
extend in physical continuity across State lines necessarily requires
the same unity of control, which is only possible by Government regu¬
lation. These are the underlying reasons why the States, by the Con¬
stitution, confided to the general Government the regulation of inter¬
state commerce.
We move along our daily paths, in periods of public tranquility,
without much concern about the great business of the public's interest.
Our patriotic President and members of the Interstate Commerce
Commission have recently given public utterances of their apprehen¬
sions regarding the grave problem of Federal and State regulation of
carriers (32).
The ray of danger that confronts our Republic is, that, to escape
from the disappointing and unsatisfactory results arising from the
conflict of the State and Federal authorities over railroads, the condi¬
tion may add to the already growing movement in favor of the nation¬
alization of our interstate railroads.
Public ownership is, of course, opposed to the traditional policy of
our Government and the historic development of its institutions.
(32)Commissioner Clark, of the Interstate Commerce Commission, re¬
cently spoke of the tremendous interest to the country of a successful and
broad policy of regulation for the carriers of the country, and referred to
the present dark days for the railroads and looked forward to a dawn of
better times. (Railway Age Gazette, September 17th, 1915, p. 496.)
18
The danger of abuse through party control of such vast properties,
representing such a large share of the wealth of our country, and the
voting strength of the army of railway employees, would be inimical
to the interests of the institutions of any popular Government.
It is claimed that public ownership would secure lower rates of
transportation, but this has not been the effect in Europe nor on the
only publicly owned railways which this Government has, for, upon
the Alaska and Panama Railways, the rates for both freight and pas¬
sengers are largely in excess of those upon the privately owned rail¬
ways in this country.
The fair adjustment of rates between different communities and on
different articles of traffic is of the highest consequence to the people
of the country, because, upon that adjustment, depends the commercial
interests of the country.
The adjustment of rates, along with the other problems which are
now handled by the State and Federal Commissions, would demand
precisely the same solution that they are receiving at present, but, with
the Government owning the railways, then the powers of the States
would cease entirely and the danger would be that these questions
would become political issues to be settled by the action of the party
majority at popular elections, rather than by the cool, deliberate deci¬
sion of those best qualified to settle such problems.
And when we contemplate Government ownership, we are irresist¬
ibly led to the conclusion that, if Government regulation is a failure,
Government ownership will likewise prove fallacious, and, if Govern¬
ment regulation can be made successful, then the reason for' Govern¬
ment ownership is eliminated.
The Constitution, as the highest expression of the will of the people,
in our popular government, does not empower the Government or the
several States to, themselves, engage in commerce, but Congress, by
our Constitution, is given the power only to regulate commerce.
19
This constitutional power should be exercised within the limits im¬
posed by the framers of our organic law, to the end that the conditions
which hamper the commerce of our country to-day may be relieved so
that our Government may sway the business of the world to-morrow.
The entire power and duty of regulation of interstate carriers should
be placed in the hands of the general Government, except as to mat¬
ters so essentially local that they cannot be used to interfere with the
efficiency of the service or the just rights of the carrier.
State control conflicts more and more with other State control and,
while State rights is all right in theory, the making of railroad rates
calls for such broad general treatment as only the National body can
give.
The Federal Government should also be given the exclusive power
to supervise and regulate the issue of stocks and bonds of carriers
engaged in interstate commerce, to the end that the securities, now
vitiated by the laws of the different States, unless reasonable fees are
paid for authority to issue them, may be given a stability which is
essential to the financing of the business of the carriers.
This, the carriers, the investors and the general public have a right
to demand, in the name of Good Government.
Good Government is the basis of order and progress for the human
race and, to perfect its objects, our immortal Constitution was adopted.
We only bear the torch of civilization because we possess the prin¬
ciples of civil liberty, transmitted to us by our Fathers.
You cannot have Good Government without adherence to these
principles, which recognize the fundamental necessity of protecting life,
liberty and property.
The concept of the demagogue is diametrically opposed to these
principles, and so surely as the popularization of false opinions-through
the appeals of the Sophists, from motives of personal gain, brought
about the overthrow of the stable principles of government in Athens
20
and Rome, so a digression from the ideals of the Fathers, in our own
country, for the fervid fallacies of fanaticism and sectional pride, will
mean the disintegration of our glorious Republic.
We cannot separate the idea of Good Government from one which
furnishes proper protection to all who are subject and worthy of its
protection and regulation. A conflict between the authorities by which
this object is frustrated is, therefore, a mistaken idea of Government.
It is a right of all the States to have the Constitution enforced, to the
end that Congress may regulate commerce between the States and, if
the representatives of the people of any State or section usurp this con¬
stitutional right of all the States, then, to that extent, the fundamental
law of our country has been denied.
The ancient distrust of the Federal Government and the undue
emphasis upon the rights of the States are responsible for many of our
existing legislative evils, and, according to the immutable decree of
history, our States have not always been right in the assertion of their
power regarding personal rights.
Notwithstanding the urgent necessity that exists for uniform pro¬
cedure, divorce laws, negotiable instrument laws and uniform cor¬
poration laws, our experience has shown that it is practically impos¬
sible to secure concerted State action upon any of these subjects.
Individual freedom, the right to life, liberty and property and the
consummation of the higher aims of government are not always con¬
sistent with the asserted prerogatives of our individual States.
Just as the power of the Federal Government was necessary in the
cause of humanity to free the country from the "peculiar institution"
known as human slavery, maintained by an erroneous theory of State's
rights, so it is to-day essential to strike from the commerce of the
country the shackles of a bondage forged by ill-conceived State regu¬
lation.
21
These ideas should be placed on a plane above the narrow limits of
prejudice or the arbitrary boundaries of any section or State, to the
end that we may always adhere to the correct doctrine proclaimed by
Webster :
"LIBERTY AND UNION, NOW AND FOREVER, ONE AND
INSEPARABLE", and enjoy the fullest measure of blessings incident
to this broad principle of our free Government.
Regulation of the agencies of commerce is necessary both for the
public interest and to protect the commerce, itself, and, to the end that
these State and Federal agencies, which means so much to the com¬
mercial prosperity of the country, may be administered in the most
efficient manner, the present conflicts between State and Federal con¬
trol should be eliminated and the regulation should be conducted under
Federal authority, as the Constitution provides.
The problems we have mentioned, following the advent of a new
departure of government into our complex civilization, are but the
natural results of untried human action along unblazed trails.
Man's experience has always created and will always develop new
problems, but human wisdom, guided by the light of Justice, through
the slow, but sure, processes, which make for human progress, will
always seek to regulate his conduct so that each problem shall be
solved and every right will have a remedy, by means of the broad,
civilizing and constructive force of Law.