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AN EXAMINATION OF FEDERAL POWERS
IN RESPECT OF RAILWAYS

& ºmº-.
|Transroº $ 8 ºf sº
CARMAN F. RANDOLPH
52 WILLIAM STREET, NEW YORK
Transportation
library
|-| E
j C. § {
PART ONE.
THE AMERICAN RAILWAY SYSTEM S. I
RAILWAYS CHARTERED BY STATES SS. 2–3.
RAILWAYS CHARTERED BY CONGRESS SS. 4-5.
FOREIGN RAILWAYS SS. 6–7.
FUNDAMENTAL PRINCIPLES OF LAW SS. 8–9.
CONSTITUTIONAL PROVISIONS SS. IO-I I.
THE COMMERCE CLAUSE SS. 12-24.
FEDERAL PROTECTION OF INTERSTATE COMMERCE S. 25.
EXECUTIVE REMEDIES SS. 26–28.
JUDICIAL REMEDIES SS. 29–34.
STATUTORY REMEDIES S. 35.
PART TWO.
SPECIAL CONSTITUTIONAL QUESTIONS SS. 36-37.
FEDERAL CHARTERS FOR INTERSTATE RAILWAYS S. 38.
NATIONALIZATION OF RAILWAYS S. 39.
DOES INTERSTATE RAILWAY COMMUNICATION DEPEND UPON
FEDERAL PERMISSION P - SS. 40–43.
FEDERAL TAXATION OF RAILWAYS SS. 44-51.
IS THERE A FEDERAL POWER TO OBSTRUCT INTERSTATE
COMMERCE P SS. 52-61. *
IS THERE A LARGER FEDERAL POWER OVER A COMBINATION
OF PERSONS THAN OVER AN INDIVIDUALP SS. 62-64.
HAS CONGRESS A PECULIAR JURISDICTION OVER STATE
CORPORATIONS P SS. 65-66.
FEDERAL INQUISITION INTO RAILWAY AFFAIRS SS. 67-69.
FEDERAL POWER IN RESPECT OF THE SERVICE OF RAIL-
WAYS SS. 70-75.
TRANSPORTATION RATES.
LEGISLATIVE RATE-MAKING SS. 76–85.
REGULATION OF COMPANY RATE-MAKING S. 86.
The Interstate Commerce Act ss. 87-93.
The Anti-Trust Act ss. 94-1 16.
INTERNATIONAL TRANSPORTATION SS. 117-118.
INTERNATIONAL RAILWAYS SS. 1 19-12o.
RAIL AND WATER TRANSPORTATION SS. 121-125.
CONCLUSIONS.
**
I am requested by several railway companies to make an exam-
ination of the Federal Constitution, statutes and decisions so far
as these bear upon the constitutional obligations and rights of
railroad corporations engaged in interstate and foreign commerce.
The relations between the United States and the railroads
cover a broad field, but the limitation to questions mainly of con-
stitutional law brings within the compass of a legal paper what
otherwise would be matter for a voluminous treatise. And this
limitation emphasizes what is, after all, the question of common
and vital concern to all railroads engaged in interstate com-
merce—what powers have the United States in their regard?
This query is phrased in several forms.
What powers have the United States in the public interest?
I do not take this query for my text, though I have no inten-
tion to belittle its importance.
“The question is no longer an open one” says the Supreme
Court “as to whether a railroad is a public highway, established
primarily for the convenience of the people, and to subserve pub-
lic ends, and, therefore, subject to governmental control and regu-
lation. It is because it is a public highway, and subject to such
control, that the corporation by which it is constructed, and by
which it is to be maintained, may be permitted, under legislative
sanction, to appropriate property for the purpose of a right of
4.
way, upon making compensation to the owner, in the mode pre-
scribed by law.”
The spirit of this statement is beyond criticism, but it might
be better to say that a railway is authorized primarily for public
convenience. It is actually established in the expectation of pri-
wate profit. While there is no right to exact a profit to the detri-
ment of the community the property acquired in furtherance of
the expectation is private property. From this standpoint a rail-
way enterprise may be fairly treated as a private one affected with
public obligations, rather than a public one qualified by private
rights.
This distinction is something more than a matter of terms.
It suggests a reasonable standpoint from which to approach the
question of governmental powers.
Whether the community would be better off under government
ownership and management is an academic question. So long as
the lines are built and managed by private owners these are
entitled to fair dealing over and above respect for their legal
rights.
If our railway system were perfected and indestructible a
disregard of investors’ interests beyond the strict line of constitu-
tional protection might be expressed with plausible advantage to
the community. But the system is neither perfect nor inde-
structible. Each year brings new demands on capital for exten-
sion and improvement, and they will not be sufficiently honored
without an expectation of profit.
In the event of government ownership of railways the public
interest will dominate all others; meanwhile a private interest is
entitled to consideration.
Another form of the question reads: What powers have the
United States over railway corporations because they are arti-
ficial, and not natural persons?
I reject this because its letter tends to distract attention from
substance to form. The corporation, while an artificial person
with peculiar responsibilities, is essentially the custodian of the
property of natural persons.
My reasons for rejecting the above texts lead me inevitably to
choose a third.—What powers have the United States over the
* Cherokee Nation v. Southern Kansas R., 135 U. S. 657.
5
billions of dollars’ worth of private property represented by rail-
roads?
It is in this form that the subject of Federal power presents
itself to the multitude of individuals interested in this vast prop-
erty and to the corporations charged with its administration.
Commonly it is in this form that constitutional objections to
Federal power are presented to the courts.
This property is impressed with a public use but it is never-
theless held in private ownership. And none of this private
property is corporate. It is held by individuals directly, and by
corporations for the benefit of individual stockholders, wards,
depositors and policy holders.
No large group of individuals is more directly concerned in
the extent of Federal power over property than railway investors
and beneficiaries.
It would be an exaggeration to say that railway property is in
imminent peril from hostile legislation. Yet it cannot be denied
that there is some disposition to at once magnify the public in-
terest in railroads and depreciate the private interest, and it is
well known that the railway system is among the prime objects of
those who would alter the structure and spirit of the republic by
nationalizing the great business enterprises.
Federal regulation of railways has not been long before the
courts. It is less than twenty years—a brief period in the de-
velopment of law—since Congress passed the Interstate Com-
merce Act and less than ten since the Supreme Court applied the
provisions of the Anti-Trust Act of 1890 to railroads. Divisions
in the Supreme Court on this, and kindred questions are not un-
COIſllſl OI!.
In these circumstances the time seems opportune for an ex-
amination of fundamental principies regarding the relation Jf (he
Federal Government to railroad property—an examination unem-
barrassed by the exigencies of a particular suit or a particular
bill or a particular policy, and prompted by the common and con-
stant interest of all railway managers and investors—the ascer-
tainment of property rights.
“When we recall,” says the Supreme Court, “that, as esti-
mated, over ten thousand millions of dollars are invested in rail-
road property, the proposition that such a vast amount of prop-
erty is beyond the protecting power of the Constitution, that the
** 6
owners may be deprived of it by the arbitrary enactment of any
legislature, state or nation, without any right of appeal to the
courts, is one which cannot for a moment be tolerated.”
The right of appeal from legislative fiat is as well assured to
the railways as is the right to prosecute to the Government. In
either case the railway investor is entitled to a solemn adjudica-
tion of his constitutional rights and obligations. Meanwhile he
is not bound by the snap judgments of the market place.
Nevertheless the agitation against railways is not all clamor.
Federal action consistent with Federal power and distinguishing
captious accusations from real grievances will benefit the body of
investors as well as the community.
I shall take up the main subjects of examination in this
order—the organization and status of our railways—the consti-
tutional provisions affecting railways, especially the interstate
commerce clause—the methods of expressing and enforcing Fed-
eral interest in commerce—specific constitutional questions in-
volving the relation of the Federal Government to the railways.
For the better comprehension of the main lines of this com-
plex subject I shall omit much detail and many citations that a
thorough digest should contain; and my citations will be chiefly
confined to illustrative cases decided by the Supreme Court.
* Chicago, M. & St. P. R. v. Tompkins, 176 U.S., 172.
PART ONE.
THE AMERICAN RAILWAY SYSTEM.
1. The United States Government does not build or operate
railways on its own account. *ś
Early experiments in public ownership undertaken by States
were long since discontinued, the lines being taken over by com-
panies. In some lines, however, States are stockholders, but as
a stockholder a State is in many respects like a private owner.
Public administration has played a comparatively small part
in our railway affairs. Our railway lines are now controlled by
private companies acting under State or Federal charters.
Some of these lines have been aided by Federal or State grants
of land or money or by county and municipal subscriptions, but
in respect of general rights and obligations the subventioned lines
are not radically distinguished from those built entirely with
private funds, and such special obligations as are annexed to par-
ticular subventions will not be considered in this examination.
RAILWAYS CHARTERED BY STATES.
i
-*
2. Most of our railway corporations have been chartered by
States.
The charter, like every other State law, is a public record
entitled to recognition in the other States, but, like every other
State law, it does not confer upon its beneficiaries any vestige of
power beyond the territorial jurisdiction of the incorporating
State. Interstate
If, thereafter, a company wishes to extend its lines into an “i.”
adjacent State it cannot do so without that State's assent, for not
only is it a corporation, and, as such, subject to a State's right to
refuse it the entrance which is assured by the Constitution to indi-
vidual citizens of the republic, but it is a corporation requiring
peculiar franchises, notably the eminent domain, and these can
only be granted by the territorial sovereign.
The State has precisely the same power over the extended line
within its limits as the State of origin has over the original line.
8
The position of a railway company admitted to another State
differs in important respects from that of an ordinary business
corporation. The latter is frequently admitted under a revocable
license, and may be expelled for breach of conditions.
A railway company is in different case. Unlike an ordinary
corporation, its business cannot be withdrawn from the State.
Its line, once laid, becomes a part of the highway system, and it
becomes itself permanently affected with local duties.
3. The construction of a line in one State under an original
charter and the extension of it into another by permission is not
the only foundation of our trunk railway systems. Some of these
are composed of originally independent lines chartered by dif-
ferent States and meeting at their boundaries, and thereafter
brought under the control of one of the original corporations or
a new one. Occasionally, a line is built under charters from two
or more States; and in one case, at least, the original charter of a
great corporation is granted by a State remote from its line.
Note that where a local railway “enters into the carriage of
foreign freight by agreeing to receive goods by virtue of foreign
through bills of lading, and to participate in through rates and
charges, it thereby becomes part of a continuous line, not made by
a consolidation with the foreign companies, but made by an ar-
rangement for continuous carriage or shipment from one State to
another, and thus becomes amenable to the [Interstate Commerce]
act in respect to such shipment.” -
The establishment of interstate railway communication has
involved many important questions of interstate, and corporation
law, but it is sufficient for our present purpose to understand
that each State link of a through line is, as to other States, an
independent line in this respect: It is subject to the exclusive con-
trol of the local legislature, from which all its powers of construc-
tion and operation are derived.
RAILWAYS CHARTERED BY CONGRESS.
4. Railways chartered by Congress, relatively few in number,
but of great importance, require special mention. -
So far as lines described in Federal charters are located in
Federal territory the competency of Congress is clear, and, be it
*C, N, O, & T. R. v. Int. Com. Comm., 162 U. S., 192.
9
noted, a line built under a Territorial law is in the last analysis
as national as though authorized by Congress itself, because the
Territorial legislatures are Federal agencies.
Certain acts of Congress purport to authorize construction in
State, as well as in Federal territory, but the States having
granted ample powers within their jurisdictions the question as
to a self-sufficing Federal power in the premises has not come
squarely before the courts. However, the Supreme Court has so
strongly intimated its existence as to leave no room for doubt
that an act of Congress chartering an interstate railroad would
be upheld as a constitutional exercise of power.”
5. Of the railway lines authorized by Congress some, as we
have seen, were laid in part within States, and most of the Federal
territory through which they were built is now governed by States.
In What relation do the Federal and State Governments stand
toward these lines?
Possibly some distinction may yet be drawn between the lines
originally laid in State territory and those originally laid in
Federal territory, but in view of the presumable right of the
United States to authorize an interstate line without State assent
I cannot perceive any ground for radical differentiation. I think
the relation of the State of Nebraska to the section of the first
Pacific Railway constructed in the former Territory of Nebraska
is like that of California to the section laid across her domain
with her, apparently, unnecessary consent.
In some respects these lines are Federal agencies free from
State control, in others they are subject to local regulation.
A State is clearly incompetent to tax their Federal franchises.;
The Supreme Court refused to apply to a certain company a
rule of the Wisconsin courts holding municipal aid to railways
unconstitutional, saying: “The State of Wisconsin, at least after
it had given its consent to the Northern Pacific Railroad Com-
pany to enter into its territory and construct its road, and such
consent had been acted on, could not * * * by judicial de-
cisions of its courts transform a corporation formed by national
legislation for national purposes and interstate commerce into
* See infra, S. 38.
+ California v. Pacific R., 127 U. S., 1.
Federal lines
in State
territory.
10
one of local character, with rights and powers restricted by views
of local policy applicable to State organizations.” -
On the side of State competency the Court has affirmed a right
to deal with local business in all matters of taxation, rates and
other public regulations in the absence of a contrary intention
expressed in the charter. If this qualification suggests a plen-
ary power in Congress to so amend the charters as to deprive
the States of all jurisdiction in respect of the railway property
and business within their boundaries it suggests important ques-
tions of constitutional law.i. r
At all events the present position of the lines chartered by
Congress is this—They derive effective powers from the United
States, and are subject to such State regulation as does not affect
their powers, or impair their efficiency as agencies of national
COImmeI’Ce. - -
FOREIGN RAILWAYS.
6. At this point let us note the status of railways in several
foreign countries, remarking such important likenesses and con-
trasts to our own system as will enable us to appraise by com-
parison the degree of national control appropriate to our condi-
tions and consistent with our institutions. -
English railways are authorized by special acts of Parliament
(private bills) designating the routes. They are built by private
capital and owned and operated by private companies. The
arterial system is not the result of a predetermined plan. It has
been largely created along competitive lines, but the bulk of
arterial traffic is actually carried at non-competitive rates.
In France an arterial railway system is laid out by the state
so as to secure a national service on a non-competitive basis. Six
main lines divide the territory. Each is administered by a private
company, which substantially monopolizes traffic within its terri-
tory. . The state is financially interested in each line, and at
the expiration of the several concessions between 1950 and 1960
will have the right to take over all of them upon agreed terms.
. The Constitution of Germany authorizes the construction of
imperial railways through the States of the Empire, but the re-
quirements of national service have been met thus far by the con-
necting State lines and imperial construction has not yet been
* Roberts v. Northern Pacifie R., 158 U. S., 23-24. . . . - -
+ Reagan v. Mercantile Trust Co., 154 U. S., 416–7; see also Smyth v. Ames, 159 U. S., 519,
+ S. 79 - -
11
'undertaken, though the lines in Alsace and Lorraine are the prop-
erty of the Empire. Public ownership is the rule in Germany,
only a small fraction of the mileage being in private hands.
7. Summarizing the points of interest in railway conditions
abroad we find: -
I. Strategic considerations have had more or less effect on
the French and German systems. In England commercial con-
siderations alone have been influential.
II. State ownership and administration is the rule in Ger-
many for the bulk of the lines.
In France the conditions are different. Some of the lesser
lines are controlled by the state. The arteries are in the hands
of private corporations, but the state has reversionary rights in
them.
English railways have been wholly developed by private in-
jtiative and private capital.
Organic differences between the railway conditions and politi-
cal institutions of foreign countries and our own forbid us to look
abroad for a model conception of the Federal relation to our rail-
ways. In most countries public ownership or partnership sharply
differentiates the economic problem from ours. In all other coun-
tries governmental power is free from constitutional restraints
which limit it here; and in most of them a single government en-
joys a comprehensive authority that cannot be found in our dual
system of Federal and State control. However, railway trans-
portation the world over has so many common features that all
important foreign systems should be studied in connection with
our own problems. -
FUNDAMENTAL PRINCIPLES.
The nature and extent of Federal power over railways is the
burden of this examination, and the discussion of specific appli-
cations will be facilitated by first surveying the main lines and
limitations of the power, as these are suggested by principles of
institutional law and by constitutional provisions.
8. “It has often been said,” says the Supreme Court, “that
this is a government of laws and not of men, and by this court
* * * “when we consider the nature and the theory of our in-
stitutions of government, the principles upon which they are sup-
Comparison
between
foreign and
domestic
systems.
The reign of
law.
12
posed to rest, and review the history of their development, we
are constrained to conclude that they do not mean to leave room
for the play and action of purely personal and arbitrary power.”
Abhorrence of arbitrary rule is the very spirit of our institu-
tions. Our attitude is not novel. We have not evolved new prin-
ciples of liberty. We have brought liberal texts from the old
world. But, of all nations, we alone have harnessed the principles
and graven the texts by empowering our courts to test the validity
of governmental acts by the terms of a written constitution.
State rights. Passing from the spirit of our institutions to their structure
it cannot be too often repeated that, while the people of the United
States are a nation for many purposes and enjoy an ample power
to promote national welfare and aspirations, the States of the
Union are distinct entities with indefeasible powers. The prin-
ciple of State rights is no longer disfigured by the provincial
jealousy which at first magnified it, nor by the interests of slavery
which provoked later its most alarming development. Voided of
menace by the passing of these inflaming incidents the principle
stands as a wholesome and a sober proposition of institutional
law unshakable by any plea of inconvenience that may be from
time to time urged against it.
Before the Civil War there was reason to demand more
efficient power for the Federal government. To-day there is rea-
son to rebuke a tendency toward centralization derogatory to the
proper functions of the States.
National sentiment so happily developed must march with
local responsibility, not override it.
Eunmerated A third elementary proposition of persistent interest in this
* examination is that the Federal Government is one of delegated
and enumerated powers.
Lawful acts of this Government must emanate from the Con-
stitution, for by this instrument all its powers are delegated, and
they must find a distinct authority therein either in express words
or in their reasonable implication.
9. Self-imposed restraints and organic divisions of power per-
meate our whole system of government, and the degree of
restraint and the location of authority afford fruitful subjects of
controversy.
* Chicago & Milwaukee R. v. Tompkins, 176 U. S., 172.
13
As the system enjoins a general principle of conservatism in
the conduct of affairs it sometimes irritates radical elements in
our body politic and chafes impetuous politicians.
As it commends the handling of burning questions with a re-
gard for the permanent welfare of the whole republic its counsel is
often unheeded by ill-balanced persons possessed by the exciting
issue of the moment.
It would be strange indeed if the constitutional controversies
of the market place should never ruffle the bench. Constitutional
causes in the Supreme Court provoke now and then views so
divergent, so obscure, so charged with opportunism as to excite
apprehension for that stability of jurisprudence which is only
assured by the clarity and the sequence of judicial opinion.
Yet reviewing the history of the Court for more than a century
we shall find that the commendation due for its achievements
So far outweighs just criticism of its shortcomings as to distin-
guish this tribunal, of unique authority in the world, as the most
satisfactory of our institutions in its workings. Appreciating the
Substantial measure of success that has followed the efforts of
the Court to solve past problems we are encouraged to expect the
fair adjudication of present ones,
With this expectation I continue the examination of Federal
power over the railroads with a scrutiny of several provisions of
the Constitution.
CONSTITUTIONAL PROVISIONS.
As the Constitution does not mention transportation works
(save routes for the carriage of mails) or common carriers of any
kind, a Federal power in respect of railroads must be derived by
implication.
10. I decline to construe the “general welfare” clause in Arti-
cle 1, section 8, as implying a grant of substantive power, though
this is sometimes asserted in the loose speech of the stump, and
has even been claimed in debates in Congress. The Supreme
Court does not countenance the vicious method of constitutional
interpretation that would wrest these words from their context,
and pervert them from a mere description of the purposes of
taxation into a blanket delegation of power rendering all specific
grants superfluous.
** General
Welfare.”
14
“Necessary
and proper"
laws.
While we find no grant of substantive power in the “general
welfare” phrase of the tax clause, we do find a general grant of
ancillary powers in the clause authorizing Congress to “make all
laws necessary and proper for carrying into execution the fore-
going powers, and all other powers vested by this Constitution in
the Government of the United States, or in any department or
office thereof.” This clause calls for no comment here. Had it
not been inserted it must have been implied. A government un-
able to execute the powers conferred upon it would be absurd.
Post roads.
11. The grant of power to Congress to “establish post roads”
has been viewed by the Supreme Court as a likely source of Fed-
eral power to build interstate railroads,” and it is at least the
basis for their designation and use as mail routes.
All steam railroads are declared to be “established post
roads,”f and the companies are required to carry the mails at a
rate of compensation fixed by contract upon trains selected by
the Government. In case of failure to agree upon terms the
Government could of course insist upon the performance of the
service at reasonable rates, and in the event of persistent disagree-
ment the proper compensation would be determinable by the
Court of Claims.
Congress is empowered to determine what can be, and what
shall not be carried in the mails, subject to the guarantees respect.
ing unreasonable searches and the liberty of the press. This right
does not imply a power to interfere with transportation gener-
ally...;
It is easy to refute a possible argument that the definition of
all railways as “established post roads” fixes upon lines author-
'ized by States as substantial a Federal character as have lines
authorized by Congress. By the same statute “all letter carrier
routes established in any city or town for the collection and de-
livery of mail matter” are also “established post roads,” and the
reasons which discredit the notion that the Federal Government
hereby arrogates a general authority over the streets in our cities
are equally potent in the case of railways. In each case the Gov-
ernment simply demands that an existing highway shall afford
an unobstructed route for its mail.
*See California v. Pacific R., 127 U. S., 89; Luxton v. North River Bridge, 158 U. S., 525.
+ Rév. Stat., S. 3964.
# Jackson's Case, 96 U. S., 727; Rapier's Case, 143 U. S., 10.
15
. . . The Federal power to make war and suppress insurrection war power.
has been deemed a sufficient source of authority to construct rail-
roads for strategic purposes,” and unquestionably there is a right
to requisition existing roads for military use.
TEIE COMMERCE: CLAUSE.
12. The clause empowering Congress to regulate commerce
among the several States clearly confers a substantial Federal
jurisdiction over railroads so far as they are agencies of this
commerce, and for most purposes it is the chief and sufficient
source of whatever powers the Federal Government enjoys in
their regard.
In considering the commerce clause it should be borne in mind
that, generally speaking, this branch of Federal jurisprudence
has been developed by the Supreme Court slowly, cautiously, With
nice distinctions, with abundant reservations, all because of the
complexity of the subject and the frequent difficulties in deter-
mining its relation to the constitutional rights of States and
persons.
The proverbial unwillingness of our courts to predetermine the
law in cases not actually before them is here notably illustrated.
This caution is especially marked in dealing with a novel phase
of the complex subject; and the whole matter of Federal regula-
tion of railways in particular, and of trusts, combinations and
monopolies in general, is comparatively new. -
º 13. The definition of the “commerce” subject to Federal juris- Definition of
diction is discussed in nearly every important opinion construing ** Commerce.”
the commerce clause, and before taking up our subject of railway
transportation it will be profitable to consider briefly the general
meaning of the word in our constitutional jurisprudence.
Every person directly facilitating the interstate passage of
persons, communications or property is engaged in interstate com-
merce—maintaining a bridge;f forwarding express matter;
transmitting telegraph,S and facilitating telephone messages.
The movement of any person, thing or communication from
one State to another is interstate commerce—a man crossing a
bridge;|| “a flock of sheep driven across a State;”** gas passing
* California v. Pacific R., 127 U. S., 39. g
t Covington Bridge v. Kentucky, 155 U. S., 219.
f See Adams Express Co. v. Ohio, 165 U. S., 194.
§ W. U. Tel. Co. v. James, 162 U.S., 654.
| Covington Bridge v. Kentucky, 154 U. S., 218.
* Kelley v. Rhoades, 188 U. S., 1.
16
through an interstate pipe line;” a telegraph message.f. Each of
these things is included in Chief Justice Marshall’s definition of
commerce as “intercourse.”:
Now, when we say that an act of interstate intercourse is
“commerce” we indicate something which Federal power is com-
petent to protect from interference, but we are far from placing
all the inducements, incidents and sequences of the act within the
jurisdiction of Congress.
For example, one carrying an insurance policy from New York
to New Jersey travels under Federal protection, but the Supreme
Court has decided that the insurance business in which he is en-
gaged is not interstate commerce.; Again, some of the most im-
portant questions in respect of Federal regulation of industrial
“trusts” hinge on whether the mere forwarding of goods from
State to State by the owner for his own use, or for ultimate sale is
a commercial transaction within the purview of anti-trust legisla-
tion. - - ; :
- * -- *ºr.
4 :
! {
Fortunately in dealing with railway companies we do not have
to discuss whether their business of transportation is commerce,
for this it plainly is. “Transportation for others, as an indepen-
dent business,” says the Supreme Court, “is commerce, irrespec-
tive of the purpose to sell or retain the goods which the owner
may entertain with regard to them after they shall have been
delivered.”
14. In transportation the line between State and interstate
commerce, between State and Federal jurisdiction, is generally
more readily perceived than in other branches of business, yet
even here the courts are sometimes required to draw it.
Deferring all questions as to a Federal interest in the organ-
ization, construction and general management of transportation
agencies, we shall consider two groups of cases relating to the
act of transportation itself.
The first group yields the proposition that the movement of
persons or freight from one point to another within a State in
order to begin or end an interstate journey is not necessarily
interstate commerce.**
Movement
incidental to
interState
transit.
* See State v. Gas Co., 120 Ind., 575.
+ W. U. Tel. Co. v. James, 102 U. S., 654,
f Gibbons v. Ogden, 9 Wheat., 189.
§ See Paul v. Virginia, 8 Wall, 168, N. Y. Life Ins. Co. v. Cravens, 178 U. S., 389.
| Hanley v. K. C. S, R., 187 U. S., 619.
* Brown v. Houston, 114 U. S., 622; Coe v. Erroll, 116 U. S., 517; Diamond Match Co. v. Ontona-
gon, 188 U. S., 82. *
17
This is well illustrated in a recent case. A railroad company,
maintaining a cab service in New York City for the use of patrons
entering or leaving town by its interstate ferry, contested a State
tax on this service on the ground that it was a burden upon inter-
state commerce. The Supreme Court sustained the tax, saying:
“The cab service is rendered wholly within the State and has
no contractual or necessary relation to interstate transportation.
It is either preliminary or subsequent thereto. It is indepen-
dently contracted for, and not necessarily connected therewith.
But when service is wholly within a State it is presumably Sub-
ject to State control.”
In somewhat the same vein the Supreme Court held that a
railway company did not violate the Interstate Commerce Act
by offering free cartage in one town and not in another, but it
observed that the Commission might have the power to order rail-
ways furnishing free cartage to publish this fact in schedules of
terminal charges.f
Generally speaking the terminal services performed by a rail-
way in pursuance of a contract for interstate carriage are a part
of the interstate service.3
15. The second group of cases relates to actual routes.
The Supreme Court decided that a vessel sailing on the high
seas from San Francisco, California, to San Diego in the same
State is subject to a Federal statute limiting the liability of ship
owners for loss, etc., to the value of their interest in the ship and
freight and it cited a circuit opinion by Mr. Justice Fields deny-
ing the power of a State Commission to regulate freight rates in
the case of a similar voyage.]]
The Court did not rest its decision upon Federal admiralty
and maritime jurisdiction, but upon Federal power to regulate
commerce with foreign nations. In neither case, however, was
there actually commerce “with foreign nations.” Jurisdiction
was really assumed because a part of the route taken lay beyond
the State and in the open sea, wherein no State of the Union has
jurisdiction and all nations have equal rights.
In a recent railway case” freight billed from one point to an-
ther in Arkansas was carried by rail in part through the Territory
* Pa. R. v. Knight, 192 U. S., 21.
t Int. Com. Comm. v. Detroit, etc., R., 167 U. S., 633.
# See Rhodes v. Iowa, 170 U. S., 412; Int. Com. Comm. v. Chicago, B. & Q. R., 186 U. S., 320.
§ Steamship Co. v. Ry. Comm., 9 Sawyer, 253.
| Lord v. Steamship Co., 102 U. S., 541.
** Hanley v. Kansas City, etc., R., 187 U. S., 617.
Transit be-
tween State
points via
foreign route.
18
of Oklahoma. The transportation was declared to be interstate
commerce, and the Court gave the common principle of both the Sea
and the land cases in citing this passage from Mr. Justice Field's
opinion, “to bring the transportation within the control of the
State, as part of its domestic commerce, the subject transported
must be within the entire voyage under the exclusive jurisdiction
Of the State.”*
It should be observed that, while the Federal Government
denies a State's right to control transportation rates because of
jurisdiction over terminal points, it regulates through traffic be-
tween domestic points via foreign territory on the ground that
the terminals are within the republic. For example through rates
from Portland to Chicago via the Grand Trunk Railway of Can-
ada are within the purview of the Commerce Act.
Federal jurisdiction is here unquestionable, and if it be argued
that a consistent rule would leave a State free to regulate rates
between local terminals regardless of the actual route, we can
only say that an inconsistency of no great importance has been
approved by the Supreme Court's deciding a nice question be-
tween State and Federal jurisdictions, in favor of the United
States.
16. Congress is expressly empowered to “regulate” interstate
commerce. This word is sometimes construed as though it ex-
pressed all the strength and elasticity which general usage attri-
butes to it.
We “regulate” water by grading its flow, by turning it off and
on. Very much the same sort of control over interstate com-
merce is being claimed for Congress, but as we are dealing with
a legislature, and not with the boss of an irrigation ditch, we define
the word by a legal rather than a physical standard.
To “regulate” means, exactly, to “make laws,” of a character
agreeable to the Constitution, for whatever shall be judicially
defined as commerce among the States.
17. The Supreme Court declares that the commerce power of
Congress must be exercised in a uniform manner, f but as we have
no line of decisions annulling statutes for want of uniformity we
are unable to give this declaration a precise value.
Congress is not forbidden by a rule of uniformity to pass any
special law whatever in regard to commerce. Unlike the gen-
erality of State legislatures it has, outside the province of indirect
Meaning of
“regulate.”
TJniform regu-
lation.
* Steamship Co. v. Railroad Comm., 9 Sawyer, 258.
+ Gloucester Ferry Co. v. Pennsylvania, 114 U. S., 204.
19
taxation, a very broad competency in the matter of special legisla-
tion.—Witness the special charters of the transcontinental rail-
way companies.
On the other hand, I think it is equally clear that Congress
could not single out a specific State corporation for subjection to
rules so evidently of general concern as those embodied in the
Commerce, and the Anti-Trust Acts.
Between these distant poles of ability and disability there is a
field for investigation which need not be entered until some stat-
ute shall render inquiry imperative. Meanwhile we may assume
that the statement of the Supreme Court is intended to discourage
legislation plainly subjecting commerce of a particular kind, or
in a particular locality to invidious burdens.
18. Federal power in regard to interstate commerce is judi-
cially pronounced to be “exclusive.” The word is sometimes Vul-
garized as indicating a power of peculiar vigor. In truth, it is
merely a description common to the generality of Federal and
State powers. There is a division of powers between the United
States and a State, but no conflict of authority. Conflicting
claims are addressed to the definition of jurisdictional boundaries.
When these are determined the nation, or the State, is accorded
a jurisdiction in which its powers are “exclusive.”
The reason for dwelling upon the exclusiveness of Federal
power over interstate commerce is that, unlike the clear cut Fed-
eral jurisdiction over such subjects as war, coinage, and foreign
relations, both Federal and State governments deal with the com-
merce of our country, and the dividing line, being in some cases
obscure, the courts are called upon to decide which government
has the constitutional, and therefore exclusive jurisdiction of a
given branch or phase of this commerce.
19. In determining the position of the States with regard to
interstate commerce the Supreme Court makes a major classifica-
tion of acts prohibited and acts permitted.
Acts prohibited are such as relate to matters plainly requiring
a rule uniform throughout the republic,” for example, the regula-
tion of imports; and those embarrassing a distinct Federal agency
—as a tax on national banks, or a local agency in respect of its
conduct of interstate business—as a tax on the interstate business
of a local railway;f and any act whatever dealing with a subject
already adequately covered by Federal law.
* See Cooley v. Port Wardens, 12 How., 319.
+ See Postal Tel. Co. v. Adams, 155 U. S., 696.
Exclusive
regulation.
Acts pro-
hibited to
States.
20
Pegºsive Acts permitted relate to matters of sufficiently local concern to
regulation. warrant their regulation by a State in the absence of Federal
regulation. A notable illustration is the ability of a State to
authorize a bridge without a draw over navigable water, in the
absence of Federal prohibition.*
Matters within Federal jurisdiction are, in fact, sometimes
regulated partly by an act of Congress, and partly by comple-
mentary State law. For example, the Animal Industry Act leaves
room for the States to enact laws against the importation of in-
fected cattle.j
When a permissive State law affecting interstate commerce
merely prescribes a rule of conduct, its supersession by Congress
Seldom affects property seriously—a rule either ceases, or is con-
tinued under Federal auspices. But where property has been
acquired under a law, as in the case of the bridge, adverse Federal
action may have serious consequences. The owner of the bridge
has no Wested right to maintain it against the United States, # and
if the purpose of Congress be manifest its alteration, even its de-
Struction may be ordered.
20. The subject of permissive State laws involves questions of
great importance to railways, and in considering them we are
required to estimate the force of the police powers of the States—
that substantial, but undefined right to legislate for the health,
morals and safety of the community.
A State's power is never lawfully exerted where it would con-
travene the guarantees of the Federal Constitution regarding the
taking of property for public use, due process of law, and the
equal protection of the laws. Hence a lawful exertion must con-
form to Federal standards of State justice. Evidently such an
act is entitled to the highest consideration in the Federal Courts.
But where a State's action, however agreeable to Federal
Standards, would injure a Federal interest in commerce that in-
terest shall prevail. The act does not become essentially illegal.
It is simply inoperative in the Federal province.
In some cases this principle is readily applied: For example,
while a State may forbid the sale of liquor generally it cannot, of
its own motion, forbid importation and sale in original packages.;
But when articles imported in original packages are such that
* Cardwell v. Bridge Co., 113 U. S., 105.
+ Reid v. Colorado, 187 U. S., 137.
f S. 72.
§SS. 57, 58.
21
“their sale may cheat the people into purchasing something they
do not intend to buy, and which is wholly different from what its
condition and appearance import,” e.g., OleOmargarine colored to
resemble butter—a Federal interest cannot be asserted in their
behalf.” And it would seem that a State can outlaw such things
as “original packages” of burglars' tools, tainted food, etc., on the
score of their intrinsic illegitimacy.
21. In no case can the line between Federal and State juris-
dictions be accurately determined, except by sticking close to the
rule that where interstate commerce is not directly involved the
State power is complete. -
This rule does not seem to be given due weight in a recent
comment by the Supreme Court on a municipal ordinance regulat-
ing the speed of railway trains: “Such an act is, even as to inter-
state trains, one only indirectly affecting interstate commerce,
and is within the power of the State until at least Congress shall
take action in the matter.”f
The qualification seems to imply that were Congress so dis-
posed it could allow through trains to run at a higher speed than
is permitted to local trains, but I should say that where an act is
characterized as “one only indirectly affecting interstate com-
merce” it falls within State jurisdiction, and that a State regu-
lation of speed, essentially reasonable according to the standards
of the Federal Constitution is applicable to all trains.
A law compelling lower speed on through trains than on local
trains would be not only unreasonable in itself, but an illegal dis-
Crimination against interstate commerce.
22. A State has no right to prevent through railway service by
Ordering transhipment,i and when a through express is once es-
tablished a State cannot impair its efficiency by compelling it to
make unnecessary halts at local stations.#
But it is not unreasonable for the State of Ohio to require the
stopping of three trains daily, if so many run, at towns of sub-
stantial importance.]]
A State law forbidding all Sunday freight traffic is applicable
to interstate trains, at least in the absence of a Federal law to
the contrary.** The qualification is proper. It is inconceivable
* Plumley v. Massachusetts, 155 U.S., 474.
+ Erb v. Morasch, 177 U. S., 585.
tSS. 42, 75.
$See Illinois!Central R. v. Illinois, 168 U. S., 142; Cleveland, &c., R. v. Illinois, 177 U. S., 514.
| Lake Shore R. v. Ohio, 173 U. S., 285.
* Hennington v. Georgia, 163 U. S., 299.
Through rail-
way service.
22
General status
of commerce
Clause.
that Congress should wantonly assail State opinion regarding
Sunday traffic, but I think we must concede its power to ignore
this opinion in cases involving what have come to be real necessi-
ties of interstate intercourse.
23. The main object of the commerce clause, plainly disclosed
in the history of the time and in the debates in the constitutional
convention, was to preclude the States from levying tolls upon, or
otherwise impeding the traffic among them. Indeed the most
effective argument for union was the obliteration of State lines as
barriers to commercial intercourse.
So far, then, as States are concerned, commerce among them
shall be free, but a great issue is raised by the question whether
when the States abandoned their power to hamper traffic they
conferred upon Congress the right to do so.”
24. Arguments pressing for the application of a special clause
of the Constitution to a special case are apt to isolate both clause
and case, and give a false prominence to each. This common
fault of zealous advocacy is marked in much of the argument
against the “trusts”—No function of Congress so high as regula-
tion of interstate commerce, no phase of this commerce so im-
portant as unchecked competition among its agents. The attribu-
tion of all our economic, and most of our moral ills to the “trusts”
is a matter beyond the province of this paper, but the exaggera-
tion of the scope of the commerce clause is of legal interest.
This clause, like its fellows, is but part of a related whole.
Like its fellows, it is to be construed with strict deference to
Federal limitations on the one hand and State rights on the other.
The Federal limitations of general interest are that no regula-
tion shall deprive any one of property without due process of law
or take property for public use without just compensation.
The State rights are in sum that “commerce among the States”
shall be so defined as to leave commerce in the States within their
exclusive jurisdiction.
FEDERAL PROTECTION OF INTERSTATE COMMERCE.
25. Having outlined Federal jurisdiction over interstate com-
merce, we proceed to inquire how Federal powers to protect this
commerce are defined and enforced.
This inquiry requires a general appreciation of the diverse
*S. 61.
23
functions of the legislative, executive and judicial departments of
our government.
All rightful exertions of Federal power must find their war-
rant in written law. This is commonly an act of Congress. But
the Constitution is our principal act of legislation, and a Federal
right there defined with sufficient precision and fullness to render
a congressional definition unnecessary may be enforced either by
executive authority pure and simple, or by executive appeal to the
judicial department as circumstances dictate, each department
acting in virtue of the jurisdiction conferred by the Constitution
and by general acts of Congress.
This proposition must be immediately followed by a statement
of its limitations. The President is of necessity invested with a
large authority to protect American interests abroad, and its
proper limitations need not be suggested here, but in domestic
matters he rarely finds in the Constitution itself a law ready to
his hand. Generally, a statute is the indispensable warrant for
executive action. This rule marks at once the normal monopoly
of Congress in the matter of legislation, and a wholesome jealousy
of executive usurpation by way of extracting express laws from
constitutional principles.
EXECUTIVE REMEDIES.
26. Occasionally the Constitution affords a rule ready for exe-
cutive enforcement without congressional definition.
In Neagle's case” the petitioner had been ordered by the De-
partment of Justice to protect Mr. Justice Field during his tour
of duty in California from a threatened attack by a litigant. The
attack was made and Neagle killed the assailant, being in fear for
his own life. He was imprisoned by the State authorities, but
was released by order of the Circuit Court of the United States on
the ground that he was “in custody for an act done * * * in
pursuance of a law of the United States” within the meaning of
the Habeas Corpus Act.
In arguing this case the attorney-general quoted from the
presidential oath of office prescribed by the Constitution “and will
to the best of my ability preserve, protect and defend the Consti-
tution of the United States,” and said: “Does it not, by necessary
implication invest the President with self-executing powers; that
* 135 U. S., 1.
Source of
Federal power.
Neagle's case.
24
is, powers independent of statute?” The Court wisely ignored
this suggestion of a sweeping executive power, and turned to the
clause of the Constitution requiring the President to “take care
that the laws be faithfully executed.” “Is this duty,” said the
Court, “limited to the enforcement of acts of Congress or of trea-
ties of the United States according to their ea press terms, or does
it include the rights, duties and obligations growing out of the
Constitution itself, our international relations and all the pro-
tection implied by the nature of the government under the Con-
stitution”?f
Even this question is perhaps too broadly phrased and the
actual decision did not answer it. The Court was of the opinion
that an executive order for the protection of a judge in the dis-
charge of his duties was based upon a law of the Constitution
itself, but it held also that Neagle had an express warrant for his
action in the act of Congress defining the powers of United States
marshals and deputies.;
27. Executive reliance upon a direct law of the Constitution
is markedly illustrated in a case involving our subject. During
the strike of the American Railway Union in 1894 President
Cleveland sent Federal troops to Chicago of his own motion to
relieve a violent obstruction of interstate commerce and the mails.
The propriety of this act was recognized by the Supreme Court
in the Debs case, as we shall presently see.
Observe that in both the Chicago strike and the Neagle case
executive orders were predicated upon actual or threatened vio-
lence to Federal interests. They are thus assimilated to actions to
repress insurrections, and I think that only such events afford
strict justification.
28. As lawful executive action is illustrated in the Chicago
case so the propriety of inaction is illustrated by the official atti-
tude of the Government toward the strike of the anthracite coal
miners in 1902. President Roosevelt refrained from sending Fed.
eral troops into Pennsylvania in obedience to the law of the Con-
stitution.
Federal troops may be sent into a State upon a proper request
by the governor. The governor made no request.
Insurrection is a call for troops, but while confusion and vio-
lence were rife throughout a large district there was no distinct
Chicago rail-
way strike.
Anthracite
coal strike.
* 135 U. S., 82.
+ 135 U. S., 64.
£135 U. S., 68.
25
impairment of Federal authority. Nor, while the State authori-
ties were accused of inefficiency, was there such a subservience to
disorderly elements as would justify Federal interference to make
good the supreme guarantee of republican government in each
State.
Federal troops may be employed to prevent violent obstruction
of the mails—there was none of this in Pennsylvania—and of the
free course of interstate commerce. Now, during the strike, little
anthracite coal was carried out of Pennsylvania, and the volume
of interstate commerce was diminished. But, though there was
some damage done to railways, the main difficulty was not in the
carriage of coal, but in extracting it from the mines, and Federal
intervention could have been justified only on the theory that the
mining of coal intended for export was an act of interstate com-
IſleI'Ce.
This theory was prudently disregarded. Had the President
presumed to define the preparation within a State of articles
intended for export as a transaction of interstate commerce he
would have countenanced the notion that a large portion of the
business of the republic hitherto assumed to be under the exclu-
sive control of the States is in point of law the immediate concern
of Congress, and would have acted in contempt of the Constitu-
tion as expounded by the Supreme Court.”
JUDICIAL REMEDIES.
29. We pass from executive action, pure and simple, to judi-
cial action prompted by executive appeal.
The Federal Government, appearing by the Department of
Justice, is a frequent suitor for the enforcement of public rights
defined in acts of Congress, and cases illustrating our subject
Will be noted later.
The question of present interest is whether the Department of
Justice can bring a suit in the absence of a statute plainly defin-
ing the Federal right claimed. The broad answer is that where
there is a concrete right, however derived, the Department of Jus.
tice is authorized by the Constitution and the general tenor of
the Judiciary Act to present it to the courts.f
Specifically, in what cases can the Federal Government apply
*See U. S. v. E. C. Knight Co., 156 U. S., 1.
+ See U. S. v. San Jacinto Tin Co., 125 U. S., 273; U. S. v. Bell Telephone Co., 128 U. S., 315.
26
to the courts to prevent States or individuals from restraining
interstate intercourse?
30. In the Debs case, dealing with the Chicago railway strike
of 1894,” the Supreme Court thus commenced its unanimous
opinion: “The case presented by the bill is this: The United
States, finding that the interstate transportation of persons and
property, as well as the carriage of the mails, is forcibly
obstructed, and that a combination and conspiracy exists to Sub-
ject the control of such transportation to the will of the con-
spirators, applied to one of their courts, sitting as a court of
equity, for an injunction to restrain such obstruction and prevent
carrying into effect such conspiracy. Two questions of import-
ance are presented: First, Are the relations of the general Gov-
ernment to interstate commerce and the transportation of the
mails such as to authorize a direct interference to prevent a forci-
ble obstruction thereof?” [Upon this point the Court strongly
supported the action of the President in sending troops to Chi-
cago.] Second. If authority exists, as authority in governmental
affairs implies both power and duty, has a court of equity juris-
diction to issue an injunction in aid of the performance of such
duty?” This the Court answered in the affirmative, and disregard-
ing the Anti-Trust Act, it based its judgment upon the constitu-
tional power of the President to keep open the routes of inter-
state commerce and the mails.
31. Mr. Justice Brewer, who wrote the opinion in the Debs
case, seems to regard this as an ample precedent for Federal
action, independent of the Anti-Trust Act, against parties charged
with restraining interstate commerce by imposing unreasonable
rates of transportation. In a dissenting opinion in Missouri Pa-
cific R. vs. U. S., he says: “We held in In re Debs, 158 U. S.
564, that the United States had a right, even in the absence of a
statute specifically authorizing such action, to come into the Fed-
eral courts by an original bill to restrain parties from obstruct-
ing and interfering with interstate commerce. It seems to me
singular that the Government can maintain a bill to prevent
others from obstructing and interfering with interstate commerce
and yet cannot maintain a bill to compel carriers to fully dis-
charge their duties in respect to such commerce.
“It is said that this is a suit to compel the carrier to refrain
from discriminating against places; that there was no common
Debs case.
* 158 U. S., 564.
+189 U. S., 288–291.
27
law duty to abstain from such discrimination. * * * But
confessedly it was a common law duty of a carrier to make no un-
reasonable charges. * * * The charges for shipments for
freight between St. Louis and Wichita are “unreasonable, excess-
ive, exorbitant and unjust in and of themselves.” Surely here is a
disregard of what was at common law a plain and recognized
duty of the carrier. * * *
“But * * * the Interstate Commerce Act itself forbids
unjust discrimination * * * It is nowhere said in the Inter-
state Commerce Act that this duty or any other duty prescribed
by statute is to be enforced only through the action of the Com-
mission. On the contrary, as we have seen, it expressly provides
that all other remedies are unaffected by the Act, and a duty cast
by statute equally with a common law duty may by the very lan-
guage of the Act be enforced in any manner known to the law.”
The Missouri Pacific suit was based upon a request made by
the Interstate Commerce Commission, before whom no hearing
had been had concerning the matters of fact complained of. In
view of these circumstances the Court in a brief opinion, not refer-
ring to Mr. Justice Brewer’s points, held that prior to the Act of
Congress of Feb. 19, 1903, such a suit was not maintainable.
In my judgment a scrutiny of the opinion in the Debs case
does not Warrant Mr. Justice Brewer’s broad deductions. “Is
there no other alternative,” says the Court, “than the use of force
on the part of the executive authorities whenever obstructions
arise to the freedom of interstate commerce “ ” *?” Quoting
from a State case, it said: “when the choice is between redress
or prevention of injury by force and by peaceful process, the law
is well pleased if the individual will waive his right to the use of
force and await its action. Therefore, as between force and the
extraordinary writ of injunction the rule will permit the latter,”
and added: “So in the case before us, the right to use force does
not exclude the right of appeal to the courts for a judicial deter-
mination and for the exercise of all their powers of prevention.”
These passages mark the sole and impregnable ground for the
Debs judgment—where recourse to arms is permissible, recourse
to courts must be commended. As it is not pretended that the
President could have sent a company of soldiers to take possession
of the offices of the Joint Traffic Association, or seize the railway
* 158 U. S. 582–3,
28
The COmmon
law in Federal
jurisprudence.
stock held by the Northern Securities Company, the procedure
in the Debs case would have been improper in these cases, where
the Government alleged a merely constructive restraint of trade,
and barely succeeded in convincing the Supreme Court that an
act of Congress condemned the transactions.
While Mr. Justice Brewer’s deductions from the Debs case
are not necessarily rebuked by the decision in the Missouri Pacific
case, I would point out that in the former case the Court did not
apply common law principles. The real basis of the judgment
was the sovereign right of the United States to free the routes of
national commerce from physical obstruction.
It is an independent question whether there is a common law
of the United States in virtue of which the Federal Government
may, without an act of Congress, proceed against persons charged
with restraining interstate trade by imposing unreasonable
rates—a question requiring a general estimation of the value, of
the common law in Federal jurisprudence.
32. In determining any cause whatever Federal judges refer
to the common law for the elucidation of constitutional and statu-
tory terms and matters of legal history,” and in suits brought
before them because the parties are citizens of different States
they determine common law questions by general standards, dis-
regarding peculiar rulings of State courts.” In these respects
there is a common law of national application.
A singular question was raised in Western Union Telegraph
Co. v. Call Publishing Co.: The telegraph company appealed
from a judgment of the Supreme Court of Nebraska ordering it to
refund money received from unreasonable charges for telegrams
sent from other States. The company pointed out that there
was no act of Congress dealing with interstate telegraph rates,
and argued that as there was no Federal common law its action
was not condemned by any law whatever.
This argument was quickly demolished. “Can it be,” said the
Court, “that the great multitude of interstate commercial transac-
tions are freed from the burdens created by the common law, as
so defined, and are subject to no rule except that to be found in
the statutes of Congress? We are clearly of the opinion that this
*Smith v. Alabama, 124 U. S., 478; Pettibone v. U. S., 148 U. S., 203.
+ B. & O. R. v. Baugh, 149 U. S., 868.
£181 U. S., 92.
29
cannot be so, and that the principles of the common law are opera-
tive upon all interstate commercial transactions except so far as
they are modified by congressional enactment.” This proposition
bears no relation to Federal power. It states the wholesome rule
that where a contract for interstate carriage is made within a
State the carrier is not free from all legal obligation merely be-
cause Congress has not seen fit to impose specific rules.
Thus far the force of the common law in Federal jurisprudence
is this: When a Federal court takes jurisdiction of a cause and
finds no constitutional or statutory provision to direct its judg-
ment it naturally turns to the common law for enlightenment.
The reason for this is admirably stated by Mr. Justice Bradley:
“May [the Court of Claims] adopt its own rules of evidence
or is it to be governed by some system of law? In our opinion it
must be governed by law; and we know of no system of law by
which it should be governed other than the common law. That
is the system from which our judicial ideas and legal definitions
are derived. The language of the Constitution and of many acts
of Congress could not be understood without reference to the com-
mon law.”
33. If the Department of Justice should file a bill to restrain
persons from violating a common law obligation, the court would
not be called upon merely to apply common law principles to a
case admittedly within its jurisdiction: It would be asked to take
jurisdiction of a public suit based on such principles. This is a
different proposition.
A criminal prosecution will not lie anywhere for a violation of
common law principles no matter how serious the consequences to
the community, but where the common law is of institutional au-
thority, as it is in England by origin, and in the States of the
Union (excepting Louisiana) by adoption, it would seem that the
government is competent to maintain these principles in the pub-
lic interest by a civil suit: For example, a bill in equity to enjoin
persons from unlawfully monopolizing or restraining trade to the
public injury.
34. Unless the common law is a Federal institution the De-
partment of Justice is not empowered to enforce its principles by
suit.
Many years ago the Supreme Court said: “It is clear there
#Moore v. U. S. SIU. S., 373. -
30
can be no common law of the United States * * * The fed-
eral government is composed of twenty-four sovereign and inde-
pendent States each of which may have its local usages, customs,
and common law. There is no principle which pervades the
Union and has the authority of law that is not embodied in the
Constitution or laws of the Union. The common law could be
made a part of our federal system only by adoption.”
This statement must not be construed to deny recourse to the
common law for enlightenment, but it warrants the proposition
that this law can only become the basis of substantive Federal
rights by adoption—that is to say by legislation.
The common law has not been adopted generally in our su-
preme act of legislation—the Constitution. Nor does the word-
ing of the commerce clause imply adoption in the particular case.
I am strongly inclined to deny a right in the Department of
Justice to proceed against monopolies and restraints of interstate
trade in the absence of statutory warrant, but it is not worth
while to prolong discussion of the matter because there is now
ample authority for such proceedings in the statute law. Indeed,
if the anti-common law interpretation of the Anti-Trust Act shall
be maintainedf the Federal Government has a power of repression
far exceeding the reach of the common law.
*~~
STATUTORY REMEDIES.
35. Leaving the extraordinary occasions where Federal action
in regard to railways is warranted by the Constitution itself, or
by a general statute defining executive or judicial power we find
the ordinary warrant in acts of Congress expressly or impliedly
affecting them.
At present the leading general statutes expressing Federal
concern in railways are the Interstate Commerce Act of 1887 with
its amendments and the Anti-Trust Act of 1890.
Interstate com- The Interstate Commerce Act is the first comprehensive statute
Ҽ" asserting Federal concern in interstate transportation by rail,
and it creates a commission of five members charged with execut-
ing its provisions.
The Commission is a cross between an administrative and a
judicial body. Like a court it hears causes and delivers opinions,
but, instead of issuing decrees binding upon the parties, it merely
*Wheaton v. Peters, 8 Peters, 658.
+ SS, 96, 97 #
31
makes recommendations. If a recommendation be disregarded
the Federal courts may be invoked to determine its legality.
Strictly speaking the Commission is a body with functions but
without powers for it is not competent to give its judgments the
force of Orders.
The Federal rights defined in these Acts are enforceable by the
Department of Justice, and by a later statute the hearing and de-
termination of Federal suits in equity may be expedited.”
* Act of Feb. 11, 1903.
PART TWO.
SPECIAL CONSTITUTIONAL QUESTIONS.
36. I have outlined our interstate railway system and the re-
lation of the Federal Government to it prefatory to the consider-
ation of specific applications of Federal power.
On the side of railway rights to the protection of interstate
transportation from embarrassment by States or individuals I
have nothing more to say, except that I believe the Federal power
adequate to repulse any novel attacks from this direction.
At present, railway investors are chiefly concerned with the
Federal power of legislation, and with the suggestion of radical
change and novel enterprise in the railway business. Especially,
are they apprehensive of an improper pressure on railroad prop-
erty.
Usually, pressure is justly imposed only where it is calculated
to enforce a specific obligation—an axiom too often ignored in
legislation directed against corporations. Corporations are
charged with corruption, and with neglect of public duties, there-
fore they are fair game for attack from any quarter. These shots
miss the mark. Corruption and neglect are not remedied by larger
public revenues and lower freight rates. A decent community
does not think to offset wrongdoing by blackmailing wrongdoers.
Punishment is the remedy for corruption: Performance, for neg-
lect of duty.
Inconsequence, again, mars the argument that corporations
are marked for especial burdens because they facilitate the growth
of enormous private fortunes. If this growth be an evil within
the lawful and useful province of legislation the lawmakers should
attack it squarely. A burden placed upon railway companies
is felt chiefly by the legions of small investors, savings bank de-
positors and insurance policy holders.
Furthermore, a burden of any kind imposed upon a railway
corporation is, as a rule, ultimately expressed in money and a
needless, if lawful, requirement is likely to entail a public dam-
age none the less direct because not always plainly sequent.
Either the company will demand higher rates for no better service,
or it will depreciate the service through enforced retrenchments.
33
Legislation cannot check the operation of this automatic law of
trade. -
37. The constitutional problems I have in mind are indicated Constitutional
by the following queries: problems.
The first group relates to the authorization and control of rail-
ways:
Is the Federal Government authorized to build and operate, or
charter interstate railways?
Is it authorized to acquire interstate railways already built
under State auspices?
Is it authorized to compel the owners of such railways to take
Out Federal charters?
May the extension of a State railway into another State be
made to depend upon Federal license?
A second group involves the application to railways of very
broad questions:
What is the taxing power of Congress in respect of railways?
May Congress prohibit interstate commerce? May it inter-
dict the operation of an interstate line entirely or in the trans-
portation of certain articles?
Has Congress greater power over persons acting alone than
when they act in concert?
Has Congress a peculiar power over State corporations be-
cause they are artificial persons?
How far may the inquisitorial power of Congress be pressed
into the affairs of State railway companies?
A third group deals with Federal interest in the administra-
tion of railways:
How far may Congress require the maintenance and improve-
ment of Service?
What interest has Congress in rates, and how far may it pro-
mote its interest by legislation?
Finally, a question for special consideration—EHow far does
Federal jurisdiction over international commerce affect domestic
railways?
None of these questions is completely adjudicated. Some
are in the stage of mere suggestion. Others are mooted in pro-
34
jects of law, in unadjudicated statutory phrases, and in judicial
dicta. While widely different in importance none should be
wholly ignored. - -
The discussion of constitutional problems is difficult even
when confined to a pending cause. It is arduous where it is
addressed to broad questions not yet brought to issue. This task,
however, is imposed by my commission, which calls for more than
a statement of the established propositions. I undertake it fore-
seeing the hazards, yet with the assurance that sound constitu-
tional primciples must secure an equitable appraisement of Fed.
eral, State and private interests in our railway service, and with
the hope that I shall contribute to their elucidation.
FEDERAL CHARTERS FOR INTERSTATE RAILWAYS.
38. The ability of Congress to authorize an interstate railway
has never been squarely presented for adjudication for, as we
have seen,” the transcontinental lines received ample powers from
the States interested.
The Supreme Court has sustained an act of Congress giving
complete authority to construct a bridge over navigable interstate
waters,i and its statements in this, and other cases; recognize the
ability of Congress to charter interstate railways. It does not
seem a vital matter whether this ability be attributed to the mili-
tary, the postal or the commerce power since a line once opened
would serve all purposes, but the commerce power seems ade-
quate. Observe that acceptance of Federal power to establish in-
terstate routes, once denied by strict constructionists, $ simply
recognizes ability to facilitate intercourse by opening ways, and
that the right to commit such works to corporations does not im-
ply a general power to charter corporations to do business in two
or more States.
NATIONALIZATION OF RAILWAYS.
39. The nationalization of railways has been broached from
time to time, and is now being recommended as a tonic for one
of the great political parties.
So far as this project bespeaks the exercise of reserved rights
* S. 4.
+ Luxton v. North River Bridge Co., 153 U. S., 525.
f California v. Pacific R., 127 U.S., 39.
- $See President Monroe's Message and Views on Internal Improvements, May 4, 1822; Messages
of the Presidents, TI 142.
35
to purchase lines chartered by Congress it simply suggests the
expediency of nationalizing a part of the general system in virtue
of existing stattitory powers, though these powers might be irade-
quate to secure satisfactory results where the original lines have
been altered, extended or reorganized under subsequent State
laws. *
The Federal right to expropriate land for an interstate railway
seems to place the enterprise so completely in the category of
Federal public uses as to justify the expropriation of existing
lines, though interesting questions might arise where a State has
reserved a right to purchase a particular section.
The practical objections to the nationalization of railways are
so great as to make the recognition of constitutional power com-
paratively unimportant. Federal ownership would centralize
power and patronage to an alarming degree, and deprive the
States of billions of dollars Worth of taxables.
If popular enthusiasm should not balk at these political objec-
tions there remains a stiff financial proposition. The owners of
the railroads must be paid for their property. Now, it is a con-
stitutional rule that for such property as is actually taken (in
this case the whole railroad property) the compensation must
be cash or its equivalent. A cash payment of several billions
would be impossible. Payment in United States bonds of such
huge figures would not be the real equivalent of cash since a gen-
eral attempt to convert them would depress the market price.
Even assuming that the courts would sustain a method of
compensation likely to prove so grossly inadequate we must turn
back to the question whether the bonds could be floated, and I
think we may take it for granted that the appeal for subscription
must be made largely to the very people who now possess the rail-
roads. In fine, the success of a comprehensive project of nation-
alization will depend on whether the owners are ready to exchange
their railways for Federal bonds in the belief that they will get
better returns under Government management than under their
OWI).
From present appearances Congress will long continue to deal
with railways as private enterprises, and it must be understood
that a lawful opportunity for their nationalization in nowise oper-
ates to enlarge the measure of governmental control over them
whilst they remain in private hands.
36
DOES INTERSTATE RAILWAY COMMUNICATION DEPEND ON FEDERAL
PERMISSION P
40. As all powers of Congress are exclusive in the sense of
crowding out State rights,” it is necessary to consider how far
the recognition of Federal rights to charter new, and expropriate
existing systems affects the status of railways which, in fact, are
lines of interstate communication, though composed of sections
originally built, or at least now largely governed under State
laws.
Evidently, Federal power is not exclusive in the sense of leav-
ing no room for State action in the premises. The legitimacy of
the State origin and present control of existing systems is unques-
tionable. But if the power be exclusive, in the sense that State
action forming local sections into interstate lines has been taken
with the tacit assent of Congress, the whole fabric of State legisla-
tion in this regard is permissive. It may be overslaughed by Fed-
eral legislation, perhaps with serious damage to property interests
hitherto supposed to be vested under State laws, though this result
would certainly not be effected without express evidences of inten-
tion, and even then Congress might be adjudged powerless to wipe
out property acquired under a long-standing presumption of legal
right.
This revolutionary idea is not yet formulated, but it is encour-
aged by a couple of current suggestions. One is that Congress
can compel persons now operating through lines under State
authority to take out Federal charters. The other, that the ex-
tension of a railway from one State into another, and the connec-
tion of State railways at a boundary are really matters of Federal
concern. Each intimates that interstate intercourse is not a
right, but is a privilege depending on the will of Congress, and if
the second one be refuted the first should fall with it.
41. State courts have held that the clause of the Federal Con-
stitution forbidding States to enter into agreements or compacts
“without the consent of Congress,” does not apply where two
State legislatures provide for the connection or extension of rail-
way lines.if But a dictum of the Supreme Court referring to the
admission by a State of a foreign railway reads: “Such legisla-
tion on the part of two or more States is not, in the absence of
inhibitory legislation by Congress, regarded as within the consti-
The compact
clause.
* S. 18.
+ U. B. R. v. E. T. & G, R., 14 Ga. 327; C. & O. Canal v. B. & O. R., 4 G. &. J. 1 (Md.)
- 37
tutional prohibition of agreements or compacts between States.”
The words I have italicized seemed to be inconsistent with the
mature opinion of the Court on the scope of the compact clause.
In an elaborate comment on this clause the Court says: “The pro-
hibition is directed to the formation of any combination tending to
the increase of political power in the States, which may encroach
upon or interfere with the just supremacy of the United States.”f
This is the plain and sound purpose of the prohibition, and after
deciding all balanced questions in favor of the United States we
are still a long way from perceiving that the creation of an inter-
state railway under State auspices tends to encroach upon Fed-
eral supremacy.
42. In St. Louis & San Francisco R. v. James, the Supreme connecting
Court said: “without objection so far from the Federal authority,”
whether legislative or judicial, it has become customary for a
State, adjacent to the State creating a railroad corporation, to
legislatively grant authority to permit foreign corporations to
enter its territory with its road—to make running arrangements
with its own railroads—to buy or lease them or to consolidate
with the companies owning them.” The words I have italicized
seem to hint at a possible Federal power of license, but the pas-
sage merely recites a fact. It does not contain enough law to
make a dictum.
The above recital does not disturb my conviction that each
State has a perfect right to locate railways in its territory at dis-
cretion, except where a location across navigable water is de-
sired, $ and upon this hypothesis the refutation of the idea that
interstate connections depend on Federal permission proceeds
along very simple lines.
Federal power excludes State power only where each pur-
ports to act upon the same subject, and a railway built from Bos-
ton to New York under State charters is sufficiently unlike a
parallel line chartered by Congress to place it in a different cate-
gory. The former, like the latter, is a continuous line in fact, but
in point of law it is a chain of State lines whose connection can-
not be forbidden by Congress.
Indeed, a connection cannot be imposed by Congress. The
* S. L. & S. F. R. v. James, 161 U. S., 562.
+ Virginia v. Tennessee, 148 U. S., 519.
£161 U. S.,555,
§ S. 72.
38
Act of June 15, 1866* purports to authorize, among other things,
the interstate connection of State lines. This act forbids the
States to hamper continuous transportation over connecting
lines,f but expressly recites that it is not to be “construed to
authorize any railroad company to build any new road or connec-
tion with any other road without the authority from the State
in which such new railroad or connection may be proposed.”
In case two State corporations fail to make a desirable inter-
state connection Congress cannot compel them, though it may
charter a new company to construct the link. -
In origin and in local operation the links in a line from Bos
ton to New York are of State concern. They are of Federal con-
cern only as they forward interstate traffic.
43. To reduce to absurdity the idea that the right of Congress
to charter interstate railways implies a general authority over
the State Jinks of existing lines, it is only necessary to try it on
the common highway. The common highway system of each
State connects with those of its neighbors and thus forms ways
of interstate commerce. Who believes that a Federal right to
authorize interstate highways gives Congress jurisdiction over ex-
isting State highway systems?
The Supreme Court, it is true, defines an ordinary ferry as a
“continuation of the highway,” and holds that the business of
transporting railway cars across interstate waters is not “the
maintenance of a ferry in the proper sense of that term” and is
“essentially interstate commerce.” This distinction between a
mere way for commerce and an act of commerce leads the Court to
decide that a State cannot require a company transporting rail-
way cars across interstate waters to obtain its license to do busi-
ness, though the Court concedes for the sake of argument that a
State may require a license for an ordinary ferry to another
State.: This opinion may suggest new readings of the law in re-
spect of interstate ferries, but it does not seem to bear upon inter-
state railway communication except where this involves the cross-
ing of navigable waters.
The Constitution does not say that the means of communica-
tion between the States are those only which are authorized or
permitted by Congress. The States have an absolute right to lay
out routes in their territory connecting at their borders.
*R. S., 5258.
+ R. v. Richmond, 19 Wall., 584; Bowman v. Chicago, &c. R., 125 U. S., 484.
# St. Clair County v, Interstate Transfer Co., 192 U. S., 454,
39
The proposition that interstate intercourse is essentially a
matter of Federal privilege is a smooth suggestion that intercourse
can be forbidden, and its demerits will be fully shown in dissect-
ing the bold claim of obstructive power.
FEDERAL TAXATION OF RAILWAYS.
44. The agitation against trusts and monopolies has produced
several projects for employing the Federal taxing power against
them, with the purpose of reclaiming for the community at large
part of the profits which they are alleged to extort from its in-
dividual members, or in the hope of hampering if not destroying
their activities, or even to lay a broad foundation for a search-
ing inquisition into their affairs under cover of a hunt for
taxables. .
Some of these projects might affect railroads directly, though,
for the most part, they appear to be leveled against industrial
“trusts.” Whilst none has yet been formulated with sufficient
authority and precision to call for particular discussion, it will
be profitable to consider their general bearings from the stand-
point of constitutional law.
45. Congress will not impose a direct tax upon railroads for Direct taxes.
the broad reason that, since all such Federal taxes must be appor-
tioned among the States according to their population, none what-
ever is levied because of its inevitably unequal incidence.
Indirect taxes only—duties, imposts and excises—are availa- Indirect taxes.
ble, and these must be “uniform throughout the United States.”
The Supreme Court defines the rule of uniformity as follows:
“The words ‘uniform throughout the United States’ do not relate
to the inherént character of the tax as respects its operation on
individuals, but simply [require] that whatever plan or method
Congress adopts for laying the tax in question must be made
operative throughout the United States; that is to say, that when-
ever a subject is taxed anywhere, the same must be taxed every-
where throughout the United States, and at the same rate.” To be
short the words “do not signify an intrinsic, but simply a geo-
graphical uniformity.”
46. Where a Federal tax is otherwise lawfully formulated the Pºe
fact that it is evidently imposed for the purpose of regulating or ſº
destroying a particular business does not necessarily render it
illegal. The propriety, or rather the validity, of such taxation has
* Knowlton v. Moore, 178 U. S., 84, 106. -
40
been sustained by the Supreme Court in several cases from which
I Select two for illustration.
oleomargarine The Supreme Court has recently sustained a destructive Fed-
* eral excise on all oleomargarine subjected to “artificial coloration
that causes it to look like butter of any shade of yellow.”
The principle is that Congress may tax off the market a prod-
uct so obviously fit for deceptive marketing as to warrant the legis-
lature in preventing its sale altogether, though it be intrinsically
useful and wholesome.
This principle may be hereafter applied in other cases, but con-
sidering the facts found by the Court we may safely say that it is
confined to the suppression of fraudulent trade.
Admitting that the dairymen have suppressed the competition
of the oleomargarine makers, unless indeed these can educate con-
Sumers to use a substitute for butter of different appearance, I do
not deduce from the reasoning of the Court a general power in
Congress to shut out one class of producers for the benefit of
another. To take a fantastic illustration: If the quarrel between
sheepmen and cattlemen in the grazing country should lead to an
act of Congress taxing mutton off the market we may be well
assured of its invalidity.
I perceive nothing in the oleomargarine case of direct inter-
est to railways.
State Bank 47. In the State Bank case; the Supreme Court upheld a Fed-
* eral tax of ten per cent. upon State Bank notes imposed for the
purpose of driving such notes out of circulation and leaving a
free field for the new Federal currency. The tax was sustained
as an indirect tax, the Court saying: “The tax under considera-
tion is a tax on bank circulation and may very well be classed
under the head of duties. Certainly it is not, in the sense of the
Constitution, a direct tax. It may be said to come within the
same category of taxation as the tax on incomes of insurance com-
panies, which this Court, at the last term in the case of Pacific
Insurance Company v. Soule, 7 Wallace, 434, held not to be a
direct tax.”
Considering the objection that the tax was so excessive as to
destroy the franchises of the State banks, the Court first dis-
claimed power to invalidate a tax merely because of its oppressive
incidence, and then stated that the power of Congress to supply
* McCray v. U. S., 195 U. S., 27.
+ Veazie Bank v. Fenno, 8 Wallace, 588,
41
a Federal currency implied the right to suppress a competitive
currency issued under State authority.
If, as the Court said, the State bank tax is really in the same
category with an income tax it must now be classed among the
direct, and therefore unavailable taxes in virtue of the decision in
the Income Tax Cases;” and if, as the Court intimated, taxes on
railway freight receipts, bills of lading and passenger tickets are
also classed with income taxes these too are shelved by the same
decisions. -
Without taking these possibilities into account it would seem
that if the State bank case affords a precedent for embarrass-
ing railways this must be on the lines suggested in a dis-
senting opinion by Justices Nelson and Davis. After asserting
that the tax was direct, and therefore invalid because not levied
under the rule of State apportionment, they made the further
objection that its operation impaired the powers and faculties of
the States to create banks, and, following out this line, they said
“the present decision strikes only at the power to create banks,
but no person can fail to see that the principle involved affects
the power to create any other description of corporations, such
as railroads, turnpikes, manufacturing companies and others.”
I, for one, fail to see that the principle involved leads to such
conclusions. The essence of the decision is the right of the United
States to protect a national currency from State competition.
Should a national railway system be established the Govern-
ment could not tax connecting State railways out of commission
on the ground that it had assumed exclusive jurisdiction over
interstate railway communication for, as I have shown, it has no
such jurisdiction.f In other words the precise facts in the bank
case cannot be duplicated in the case of railways.
Nor does the principle of decision suggest dangerous conse-
quences to State corporations generally. At most it merely con-
templates their possible subjection to Federal taxation, which no
one can fairly deny, and leaves the method an open question—a
question far too broad to be discussed here in the absence of any
concrete proposal that would serve as a text.
48. The last question I shall consider under the taxing power Transit taxes.
is whether Congress is authorized to burden, conceivably to re-
strain interstate commerce by transit taxes.
* 157 U. S., 429; 158 U. S., 601.
+ S. 43.
42
There is a dictum suggesting, perhaps, an affirmative answer,”
but I am of the opinion that Congress has no such power, for the
broad reason that it is incompetent to restrain commerce among
the States.
ºtes I find a particular warrant for this opinion in the clause of
the Constitution forbidding Congress to tax exports from any
State. This clause has not been judicially construed in all its
bearings, though, obviously, it applies to merchandise sent from
a State to a foreign country.
Does it apply to the agency of transportation—to the man,
the wagon, the car conveying them across the border, to the vessel
carrying them over sea? The Supreme Court recently invali-
dated a stamp tax on foreign bills of lading, saying: “The framers
of the Constitution intended * * * that the National Govern-
ment should put nothing in the way of burden upon such exports.
If all exports must be free from national tax or duty, such free-
dom requires not simply an omission of a tax upon the articles
exported, but also a freedom from any tax which directly burdens
the exportation.”f -
This doctrine is not, of course, applicable to incidental charges
such as port dues, etc., but it would seem to forbid any tax on the
carrier which would impose a direct burden on the exportation of
goods.
49. Does the export clause apply to goods sent from one State
to another?
In one of the Insular Cases; an act of Congress ordering the
collection of a tax in Porto Rico upon goods sent from this coun-
try was sustained by a closely divided court in face of the con-
tention that as the particular goods were domestic and were ship-
ped from New York the tax was a Federal imposition upon ex-
ports from a State. -
The majority opinion, like most others in the Insular cases is
clearer in conclusion than in reasoning, but the Court expressly
disclaims any reference to interstate commerce, saying: “It is
not intended by this opinion to intimate that Congress may lay
an export tax upon merchandise carried from one State to
another. While this does not seem to be forbidden by the express
words of the Constitution, it would be extremely difficult, if not
impossible to lay such a tax without a violation of the first para-
* Gloucester Ferry Co. v. Pennsylvania, 114 U. S., 203-4.
+ Fairbank v. U. S., 181 U. S., 292.
# Dooley v. U. S. 183 U. S., 151.
43
graph of Art. I, Sec. 8, that “all duties, imposts and excises shall
be uniform throughout the United States.” There is a wide dif-
ference between the full and paramount power of Congress in
legislating for a territory in the condition of Porto Rico and its
power with respect to the States, which is merely incidental to its
right to regulate interstate commerce. The question, however, is
not involved in this case, and we do not desire to express an
opinion upon it.”
It would be, indeed, “extremely difficult, if not impossible,” to
lay an oppressive tax on interstate commerce consistent with the
rule of uniformity, but to my mind the minority of the Court
express the safe rule in saying that a Federal tax upon merchan-
dise sent from a State to whatever destination is a tax on exports
within the meaning of the Constitution, and, while this view has
not prevailed in dealing with the peculiar case of our colonies or
dependencies or whatever our insular possessions are called it
ought to be sustained in regard to interstate commerce.
It is true the “imports” and “exports” which in another clause
the States are forbidden to tax are exclusively the objects of
foreign trade. The clause does not forbid the taxation of articles
brought from another State and held for sale in the original pack-
ages,” or articles intended to be sent to another State.i. So long as
such taxes are not imposed invidiously they are not unlawful.
They are simply collected under a general levy upon all similar
articles within the jurisdiction and protection of the State. But
the imposition of a special burden would amount to a transit tax
—an unlawful restraint on interstate trade.j:
50. The application of the export tax clause to interstate com-
merce is even more exigent than to foreign trade.
There is but one reason for forbidding the taxation of goods
sent from New York to Europe: The interest of our citizens in
selling their produce. We are not concerned with the needs of
alien customers. But the shipment of goods from New York to
New Jersey benefits domestic buyers as well as sellers and is
therefore doubly entitled to freedom from transit dues, Viewing
international and interstate shipments from the buyers’ stand-
point we quickly perceive how abominable is the suggestion of
discrimination against our own people.
Are we not assured that when the framers of the Constitution
* Am. Steel & Wire Co. v. Speed, 192 U. S., 500.
tSee Cornell v. Coyne, 192 U. S., 470,
f See Bradley, J., in Brown v. Houston, 114 U. S., 630.
44
enabled foreign merchants to sell American goods at prices not
swollen by an export tax they did not confer a Federal right to
impose this burden on American merchants receiving goods from
neighboring States?
Federal taxa- 51. My comments on the Federal taxing power may seem to
tion generally. suggest too narrow limits, yet limitations are evident and I think
I have not drawn them too strictly. *
The national taxing power is narrower here than in England
and France because of our requirements of State apportionment
of direct taxes, and of uniformity of duties, imposts and excises.
As a revenue-producing power its limitations are severe, and
would be intolerable were it not that our central government is
not responsible for the entire administration of the country, but
divides responsibility with States. In view of this division the
central government does not require unlimited taxing powers.
As a disciplinary agency I think our taxing power is quite as
potent as the true welfare of the country requires.
Only as employed against foreign trade competition does
our taxing power appear to be practically unrestricted, and here
its freedom may be attributed primarily to the sweeping authority
of the Federal Government in all that relates to foreign inter-
COUII’Se.
OF FEDERAL POWER TO OBSTRUCT INTERSTATE COMMERCE.
52. Interstate commerce shall be free except as lawful
restraints be imposed by Congress. This generalization, so often
found in opinions of the Supreme Court, implies a Federal right
to impose reasonable conditions in regard to transportation:
These facilitate intercourse by promoting its security and effici-
ency. It does not imply the right to obstruct intercourse.
During the Civil War Congress forbade intercourse with the
States in insurrection, but this measure is solely referable to the
military power.
53. If there be a Federal right to obstruct interstate commerce
in time of peace it must be effectuated by heavy transit taxes,
which I have already discussed,” or else by some “regulation” un-
Arºman der the commerce clause. With this clause for a text the advocates
*...* of Federal obstruction argue that whatever power Congress
* enjoys with regard to commerce with foreign nations it must pos-
* S. 48.
45
sess over commerce among the States, since this clause contains
the whole law on both matters, and the single word “regulate”
defines the whole power.
This assumed analogy between foreign and interstate com-
merce is falsely encouraged by the occasional bracketing of these
subjects in judicial dicta, wherein the Supreme Court should be
presumed to refer merely to their evident points of resemblance,
since there was no call to consider their differences.” The
analogy is emphasized in the phrase of the Anti-Trust Act liken-
ing the trust made goods confiscable in course of interstate transit
to “property imported into the United States contrary to law.”
54. Unquestionably Congress can exclude foreign merchandise.
“Whatever difference of opinion, if any,” says the Supreme
Court, “may have existed or does exist concerning the limitations
of the power to regulate commerce resulting from other provisions
of the Constitution, so far as interstate commerce is concerned it
is not to be doubted that from the beginning Congress has exer-
cised a plenary power in respect to the exclusion of merchandise
brought from foreign countries, not alone directly by the enact-
ment of embargo statutes, hut indirectly as a necessary result of
provisions contained in tariff legislation.”f
On the export side of foreign trade there is a Federal right to
lay an embargo as an unfriendly measure, and I should define the
embargo of 1807 as essentially a reprisal, though judicial dicta
have termed it a commercial act.: But the constitutional prohi-
bition against Federal taxation of exports from any States would
seem to imply a reserved State right in export trade sufficiently
complete to preclude Congress from obstructing it except for pur-
poses of reprisal or war, or for the performance of some special
international obligation, such as withholding contraband of war.
55. In regard to interstate commerce we are asked to believe
that the States, after relinquishing their rights to obstruct traffic
with each other, intended to and did delegate that right to Con-
gress.
We are referred to an argument in an early opinion of a Dis-
trict Court construing the Embargo Act of 1807. “Unless Con-
gress by the Constitution possess the power in question [to pro-
hibit commerce] it still exists in the State legislatures—but this
* See Gloucester Ferry Co. v. Pennsylvania, 114 U. S., 203; Bowman v. C. & N. W. R., 125 U. S.
482; Crutcher v. Kentucky, 141 U. S., 57.
t Buttfield v. Stranahan, 192 U. S., 492.
# See Gibbons v. Ogden, 9 Wheat., 191.
§ S. 48.
46
Health quar-
antine.
has never been claimed or pretended, since the adoption of the
Federal Constitution, and the exercise of such a power by the
States, would be manifestly inconsistent with the power vested by
the people in Congress “to regulate commerce.’ Hence I infer,
that the power reserved to the States by the articles of confedera-
tion, is surrendered to Congress by the Constitution; unless we
suppose that by some strange process, it has been merged or extin-
guished, and now exists nowhere.”
This argument applies to the case of foreign commerce to
which it was particularly addressed, but not to the very different
case of domestic commerce.
The advocates of prohibitory power over interstate commerce
dare not present this consistent theory of constitutional interpre-
tation: As foreign commerce is like “commerce among the States”
SO is commerce “with the Indian tribes” since this is also included
in the clause. They realize that Congress can forbid our citi-
zens to trade with the tribes without a license, and even to enter
their reservations. Most of them have wit enough to mark the im-
becility of suggesting such autocratic powers over interstate inter-
course. The complete segregation of the tribal Indian from the
citizen wrecks a theory of interpretation which by its very state-
ment must apply to all the classes named in the commerce clause.
Indian wards are so completely within, and aliens so com-
pletely beyond Federal jurisdiction that our relations to each are
necessarily determinable by Congress. But what a monstrous
notion that a convenient grouping of classes in a single clause
demolishes the distinction between the citizens of the Republic
on the one hand and wards and aliens on the other in the vital
matter of intercourse!
If there is a Federal power to obstruct interstate commerce it
must be found in the constitutional relation between the Federal
Government and the States as this is defined on its own merits.
It will not be suggested by absurd analogies to unrelated things.
56. It must be conceded that Congress does not absolutely lack
obstructive power in dealing with commerce among the States,
and by treating this as a power of “quarantine” in a broad sense
we shall go far toward anticipating the nature of its limitations.
Federal power to forbid interstate intercourse in the interest
of public health is well recognized, and in a proper case may be
employed to prevent the migration of infected persons. A suf-
* U. S. v. The Brigantime William, 2 Hall's American Law Journal (1809), 279.
47
ficient illustration of its exercise in the field of trade is the statute
forbidding common carriers to receive diseased animals for trans-
portation.* • - -
I shall not attempt to set limits upon Federal quarantine in
the interests of health, except by the general proposition that a
mere legislative declaration of noxiousness will not preclude a
court from impugning its accuracy.
57. A moral quarantine must now be recognized as within the
range of Federal power, but here the proper occasions for prohibi-
tion are more difficult to determine than where the public health
at stake.
When the Supreme Court decided in Leisy v. Hardini that
liquor was an article of commerce which a State could neither
exclude or forbid the sale thereof in the “original package” of
importation, it opened a way to the partial circumvention of State
laws forbidding the manufacture and sale of liquor, which laws
had been already upheld by the Court; as consistent with the
guarantees of the Federal Constitution in respect of property and
personal liberty.
In response to the complaint of prohibition States that their
local policies were invaded by the Supreme Court's decision Con-
gress passed the Act of Aug. 8, 1890, $ declaring that “original
packages” of liquor imported into a State should be thereupon
subject to laws enacted by the State in the exercise of its police
powers. Armed by this Federal law Kansas lawfully convicted a
dealer for selling an original package of imported liquor.|
58. As the law stands a State may prevent the sale of all
liquor within its borders. But the Supreme Court has held that
it cannot prevent a man from importing liquor for his own use,”
and in Rhodes v. Iowaff it was decided that a State law forbid-
ding a common carrier to transport liquor from one point to an-
other within the State could not be constitutionally enforced
against a railway agent forwarding to its local destination an
original package shipped from another State.
At present liquor is a commodity which common carriers have
the right to transport from State to State, and consignees have
the right to receive.
* See Reid v. Colorado, 187 U. S., 139. Act May 9, 1884.
+ 135 U. S., 100.
+ Mugler v. Kansas, 128 U. S., 163.
§ 26 Stat. C., 728.
| Rahrer's Case, 140 U. S., 545.
* Vance v. Vandercook Co., 170 U.S., 488.
++ 170 U. S., 412.
Moral quar-
antine.
48
Champion v. Ames, lately decided by the Supreme Court,”
marks a successful stage in a long fight against the lottery game,
for it upholds an act of Congress forbidding any person to pro-
mote a lottery by carrying tickets, etc., from one State to another.
The Court said in the Lottery Case: “As a State may, for the
purpose of guarding the morals of its own people, forbid all Sales
of lottery tickets within its limits, so Congress, for the purpose of
guarding the people of the United States against the “widespread-
ing pestilence of lotteries,’ and to protect the commerce which
concerns all the States, may prohibit the carrying of lottery tick-
ets from one State to another.”f If ever the liquor traffic shall
be deemed a “pestilence” by the country at large the principle of
the above paragraph would seem to warrant Congress in exclud-
ing liquor from interstate commerce.
59. The claim of Federal power to establish what may be
called an economic quarantine at State boundaries brings us to
the critical phase of our subject.
The sixth section of the Anti-Trust Act, not yet adjudicated,
reads: “Any property owned under any contract or by any com-
bination, or pursuant to any conspiracy (and being the subject
thereof) mentioned in section one of this act and being in the
course of transportation from one State to another, or to a foreign
country, shall be forfeited to the United States, and may be
seized and condemned by like proceedings as those provided by
law for the forfeiture, seizure and condemnation of property im-
ported into the United States contrary to law.”
While the power here asserted immediately concerns indus-
trial “trusts,” it is of interest to railways, for if Congress can
hold up freight their receipts will be diminished, and the power
may be eventually employed directly against them. In fact bills
have been introduced fining railway companies for carrying goods
owned and shipped by “trusts” unless they are destined for the
use of the consignee.:
Neither the Anti-Trust Act, nor the railway bills present fully
the question of Federal power, for each stops short of stigmatizing
trust-made goods as essentially unfit for commerce. They do
not condemn the distribution of the articles per se, but leave pur-
chasers free to buy them in the State of production and ship them
Lottery case.
Economic
quarantine.
* 188 U. S., 321.
+ 188 U. S., 357.
t See, for example, H. R. 11,988, Sec. 10, 57th Cong., 1st Sess,
49
everywhere. They merely attack a particular method of market-
ing the articles, leaving room for their profitable disposition in
other ways. -
This is the test question: Is Congress authorized to classify
articles produced or owned by trusts with lottery tickets and for-
bid their carriage from State to State?
If such articles can be barred from all interstate transporta-
tion the claim of obstructive power is fully sustained. If not, it
is because they have qualities of lawful property which should
protect them also from discrimination in the manner of distri-
bution.
The Court defines lottery tickets as substantive articles of Com-
merce, and justifies the interdict because they pander to what in
this country is, in this generation, commonly treated as an irre-
deemably vicious traffic.
I find nothing more than this in the lottery decision, though
others profess to discover not only a novel and a broader defini-
tion of ‘commerce’ itself, but a recognition of a Federal power to
forbid interstate traffic in articles essentially useful and honest.
60. Let us mark the injustice of obstructive power by a prac- Illustration of
tical illustration of its workings. ºve
An article essentially valuable and useful is produced in
New Jersey under non-competitive auspices, and is intended for
consumption in other States. This undertaking is not repugnant
to the Federal Anti-Trust Act, which the Supreme Court has held
cannot affect the production of commodities within a State—
because this is not interstate commerce.*
The article is, therefore, property entitled to the State's pro-
tection, and if this be not duly accorded the owner may invoke the
guarantees of the Federal Constitution.; The owner, who may
be the producer, a merchant, or a consumer, transfers the article
to New York for sale or use, conveying it himself, or entrusting
it to a carrier. The very article which the United States protect
from State confiscation in New Jersey because it is lawful prop-
erty there becomes outlawed by its movement into New York. To
imagine an extreme though not an illogical development of
obstructive power New Jersey is surrounded by a cordon of Fed-
eral officials authorized to search carriers and travelers for con-
* U. S. v. E. C. Knight Co., 156 U. S., 1; see also Diamond Glue Co. v. U. S. Glue Co., 187 U.S., 616,
+ See Beer Co. v. Mass., 97 U. S., 82,
50
traband of peace, and of two articles physically alike that one
only is confiscated which is produced or owned by a “trust.”
The theory of Federal power which commends so gross an in-
terference With the free course of useful commodities would toler-
ate such enormities as the exclusion from interstate commerce of
all goods not bearing a trade union label, and even restrictions on
the migration of negro, and non-union Workmen—all in pursuance
of “public policies” highly approved by large bodies of citizens.
; 61. It may be argued that the Federal jurisdiction claimed un-
power der pretense of regulating interstate commerce, and founded on
the assertion of a right to prohibit it, would simply attribute to
Congress a control over the Federal branch of general commerce
equivalent to that which the States have over the local branch.
This falls short of the potential range of the programme for
national control of commerce now taking shape.
In the first place a notable feature of the new programme is a
definition of “commerce among the States” covering incidents and
adjuncts of intercourse hitherto assumed to be of State concern.
In the second place when we extract the essence of “commerce”
by calling it “intercourse” we perceive radical differences between
the lawful powers of the States and the proposed Federal powers.
A State can close this highway or that one, but it cannot abso-
lutely cut off the ancient personal rights of access, egress and
travel. The Federal power would reduce these rights at the State
line to a Federal privilege, depending on whether the United States
had sanctioned an interstate route. w
A State cannot forbid a man to move from place to place within
its territory, unless he is duly subjected to criminal or quarantine
restraint. The Federal power would halt him at the State line if
his progress would embarrass an economic policy approved by
Congress. -
A State cannot forbid transportation of property produced
under the Sanction of its laws. The United States would forbid
interstate transportation of property which they are powerless to
pronounce unlawfully produced,” property actually protected
from State attack by Federal guarantees.
In the third place Congress would have under the new pro-
gramme, not only larger powers than the States enjoy in similar
circumstances, but apparently a freer hand in exercising them.
*U. S. v. E. C. Knight Co., 156 U. S., 1.
51:
A State is forbidden to “deny to any person within its jurisdic-
tion the equal protection of the laws”: A State anti-combination
act is invalid which exempts from its operation farmers,” or labor
unions.f Congress is not expressly barred from class legislation in
respect of commerce, and it is not yet determined whether such a
prohibition is contained in the general principle of uniform regu-
lation.
Congress is not expressly forbidden to impair the obligation of
contracts, as are the States, and the sweep and force of Federal
power might unsettle corporate charters supposed to be protected
by the Fifth Amendment.
In fine the new programme suggests an enlarged definition of
the subjects of Federal control, and larger and more flexible powers
than the States possess in dealing with similar subjects.
In denouncing an anti-combination act of Illinois the Supreme
Court said: “The statute [exempts farmers, etc.] notwithstanding
persons engaged in trade or in the sale of merchandise and com-
modities within the limits of a State, and agriculturalists and
raisers of live stock, are all in the same general class, that is, they
are all alike engaged in domestic trade, which is of right open to
all, subject to such regulations, applicable alike to all in like con-
ditions as the State may legally prescribe.”: The new Federal
programme would define commerce among the States “as of right
open to mone,” and thus depress State communities to the legal
status of Indian tribes in the matter of intercourse.
Against the protest of strict constructionists the commerce
power has been applied now and then to cases not plainly contem-
plated by the Constitutional Convention, yet, with more or less
reason, assumed to be within its purpose to provide ample power
for a growing nation. The claim of right to obstruct commerce is
pressed in contempt of the purpose of the Convention.
The dogma of obstructive power is repugnant to a funda-
mental principle of the Union which has not been overwhelmed by
the increase of national sentiment that has marked the growth of
the republic.
No fact in our history is more pregnant with legal conse-
quences than that the Union of jealous States was largely brought
about by a common desire for free trade throughout their terri-
* Connolly v. Pipe Co., 184 U. S., 540.
+ Niagara Falls Ins. Co. v. Cornell, 110 Fed. Rep. R., 816.
# Connolly v. Pipe Co., 184 U. S., 560 (italics mine).
52
tories. How absurd to hold that the delegation of a power to
“regulate” trade carried the right to forbid it!
Prior to the adoption of the Constitution each State had the
power to forbid intercourse with Europe. This she surrendered
to the United States.
She had also power to forbid intercourse with other States. I
maintain that this was extinguished by her entrance into the
Union, not delegated. Each State obtained the right to exchange
freely all commodities not tainted with fraud, immorality or dis-
ease—all true articles of commerce. Her citizens secured free-
dom of movement throughout the republic by the very fact of
becoming citizens of the greater country.
“In all commercial relations,” said Chief Justice Marshall,
“we are one and the same people.”
“We are all citizens of the United States,” said Chief Justice
Taney, “and, as members of the same community, have the right to
pass and repass through every part of it without interruption, as
freely as in our own State.”f
u IS THERE A LARGER FEDERAL POWER OVER A COMBINATION OF
PERSONS THAN OVER AN INDIVIDUALP
62. The notion that a legislature can lawfully condemn a
group of persons for doing something which, if done by an indi-
vidual, is beyond rebuke is responsible for much of the confusion
of thought which permeates discussion of the law regarding com-
binations in restraint of trade.
In demonstrating the fallacy of the notion we will begin with
a homely illustration. A man wishing to obstruct an ordinary
highway might stand there indefinitely without accomplishing his
desire. A thousand men actuated by a like motive can obstruct
the road. In letting the individual alone and forbidding the
action of the crowd the state does not assume different attitudes
toward the same thing. The things themselves are essentially
different. In one case the highway is open, in the other it is
blocked.
If a man turn his wagon athwart a public lane a public injury
is as real as though a dozen had combined to inflict it, and the
state may forbid it.
In short, when a legislature constitutionally forbids the union
of several persons to do a specific thing there is no implied lack of
* Cohens v. Virginia, 6 Wheat, 413.
# The Passenger cases, 7 How, 492; approved in Crandall v. Nevada, 6 Wall., 49,
53
power to condemn an individual for doing it. The lawmakers
simply assume that the objectionable thing is so unlikely to be
within individual ability as to render prohibition in this direction
needless.
Understanding that where an act is lawfully definable as a
public injury the State can as well forbid its commission by an
individual as by a group, we pass to the question of intent to
inflict injury.
Here the notion is more plausible, but equally fallacious. It
is true that where two or more persons combine to inflict an injury
the state may denounce the act as a conspiracy, for they have
given substance to a wrongful intention. It is true also that one
person cannot conspire. Nor, generally speaking, can he be pun-
ished for an intent to injure; but the reason for this lies in the
difficulty of proving that advance toward action which is assumed
in the agreement of conspirators. However, the state is not in-
competent to denounce individual intent, or even individual
ability to injure where there is a real menace. A man threaten-
ing bodily harm may be bound over to keep the peace: One carry-
ing burglars’ tools or concealed weapons may be locked up.
63. Considering the question in its relation to railway affairs
within the purview of the combination clause of the Anti-Trust
Act we find that in the last analysis the usual complaint comes
to this—the imposition of unjust rates.
Conceivably this imposition may be inflicted as well by an indi-
vidual as by a combination. A dominant stockholder in two com-
peting railroads may as easily elect both directorates as the com-
bination whose acts were condemned in the Northern Securities
case. Such individual action is evidently beyond the purview of
the combination clause. In the Northern Securities case Mr.
Justice Harlan says: “What the Government particularly com-
plains of, indeed, all that it complains of here, is the existence of
a combination among the stockholders of competing railroad com-
panies which, in violation of the Act of Congress, restrains inter-
state and international commerce through the agency of a com-
mon corporate trustee designated to act for both companies in
repressing free competition between them. Independently of any
question of the mere ownership of stock or of the organization of
a State corporation, can it in reason be said that such a combina-
tion is not embraced by the very terms of the Anti-Trust Act?
Northern
Securities
C8Se.
54
Right of as-
Sociation.
May not Congress declare that combination to be illegal? If Con-
gress legislates for the protection of the public, may it not proceed
on the ground that wrongs when effected by a powerful combina-
tion are more dangerous and require more stringent supervision
than when they are to be effected by a single person?”
In the Securities case a group of five judges, including Mr.
Justice Brewer, deny any power in Congress to forbid an indi-
vidual to buy and control competing railroads. # Another group
of five, but, excepting Judge Brewer, composed of other judges,
affirm that Congress has lawfully forbidden associated persons to
gain an identical control by the particular method pursued by
the defendants.
Here is one of the perplexities of the Securities decision. In
planning remedial legislation the lawmakers must first of all de-
fine the wrong. When they have defined the wrong—in this case
the imposition of extortionate rates—they may choose to pursue
only offending combinations of persons, leaving individuals free.
The right of choice is purely incidental. If the thing condemned
be within the constitutional power of prohibition an individual
doing it could not plead immunity from pursuit.
Now, when a majority of the Supreme Court declare that Con-
gress cannot forbid A to acquire competing railways the Court
cannot consistently hold that Congress can forbid A, B and C to
acquire them. This is clear, and I shall consider later whether
the Court’s position in the Securities case is really consistent in
view of the actual facts. I am now only concerned to establish
the constitutional equality of a single person and a group of per-
sons before the law where each is doing the same thing—equality
in subjection, equality in freedom. *
64. A right of association is as well founded as the right of
individual action, except when associates seek peculiar legal pow-
ers and immunities in virtue of their union, as in the case of cor-
porations.
Where the objects of associated and of individual effort are
identical, the question of intrinsic propriety should be tested by
a single standard, but in case of an adverse answer the legislator,
comprehending the larger power of associated effort, the greater
likelihood of its abuse, and the heavier weight of its threat, may
elect to pursue the combination with peculiar vigor.
* 193 U. S., 835,
+ S 100,
—w-
55
HAS CONGRESS A PECULLAR JURISDICTION OVER STATE
- CORPORATIONSP
65. There is an impression that the United States enjoy a dif-
ferent, and a larger power over corporations engaged in interstate
commerce than over individuals in like employment, and the fact
that railway transportation is managed by corporations exclu-
sively doubtless tends to strengthen the impression in this direc-
tion.
The subject is not controlled by the principle that our govern-
ment has no greater constitutional power over a group of indi-
viduals than over one where each is doing the same thing. While
the company is, in some respects, such a group, its corporate form
introduces a new element—the artificial person, and there is a
peculiar public power over the artificial person because it owes
its very existence to a sovereign’s grant.
Recognizing the existence of this power we must determine
where it resides, and if we regard the constitutional delimitation
of Federal and State jurisdictions, we shall have no difficulty in
finding the seat of authority in every case.
66. When the United States charter a railway corporation
they enjoy the creator’s powers, except as these may be qualified
by the organization of new States along the line.” When a State
of the Union grants a charter it, in turn, enjoys all powers inci-
dent to creation.
There is here no crevice wherein the Federal Government can
thrust an assertion of creative, or even enabling power with the
resulting right of peculiar control, for the company gets no cor-
porate ability from Congress. Should New York and New Jersey
severally authorize Mr. X to build a line from Buffalo to Jersey
City there would be no room for Federal objection or permission.
And State powers must be equally exclusive where the enterprise
is entrusted to corporations.
The equality of Federal power over the corporation and the
individual engaged in interstate commerce is demonstrable by an-
other line of reasoning.
The power of Congress to keep open interstate commerce ex-
tends to every act of restraint. If a given act be not restrictive in
a legal sense no one can be called to account. If it be restrictive
the offender, whether an individual, a corporation, a combination
or even a State is equally accountable. Every act of restraint
* SS. 5, 79.
56
evokes an even power of correction, not a power graded according
to the personality of the offender. To phrase it in another way
neither a State, nor an individual is free to compass an interfer-
ence with interstate commerce for which a corporation could be
COndemned.
Since corporations, however, are more likely to interfere than
individuals, Congress may properly single them out for prohibi-
tion, and, in fact, in the matter of railway transportation corpora-
tions are generally the only agents to be considered.
FEDERAL INQUISITION INTO RAILWAY AFFAIRS.
67. The inquisitorial right of a sovereign over a corporation it
has created or licensed, though not unlimited, is necessarily exten-
sive because the grant of corporate powers imports the right to
require information as to their employment. It is even larger
over public service corporations, because these are charged with
the performance of public duties. Secret administration here is
ultimately indefensible, yet what degree of publicity can be
required depends upon the source of the demand.
Specifically, where railways derive their corporate powers
from States the Federal right of inquisition must be less compre-
hensive than the State right.
Furthermore, as Congress has no greater power over a State
corporation, because this is an artificial person, than it has over
an individual,” it follows that the affairs of a company engaged in
interstate commerce are not in point of law open to a deeper in-
vestigation than are those of an individual or a partnership in like
employment.
68. The fundamental principle of lawful inquisition is that a
government's right to demand this or that information depends
upon the relevancy thereof to a subject within its jurisdiction,
Applying this principle to railways, we find that Federal
rights only extend to their business of interstate commerce, that
is to say to transportation from State to State.
While railway companies are expressly excepted from the
jurisdiction of the new Bureau of Corporations, they are subject
to investigation by the Interstate Commerce Commission, which is
entitled to judicial process to enforce its lawful demands.”
The distinction between State, and interstate commerce has
been recently considered. At the hearing of a complaint alleging
Interstate
Commerce
Act.
* S. 62-64.
+ Int. Com. Comm. v. Brimson, 194 U. S., 25.
57.
unreasonable charges for interstate carriage of coal the Commis-
sion ordered several railway corporations to produce contracts
made between certain mining companies in Pennsylvania and in-
dependent mine operators. The contracts were alleged to provide
for the purchase by the companies of all the coal produced by the
operators at a certain percentage of the price at tidewater, the
companies paying transportation charges and sales expenses. It
appeared that the railway corporations were the principal owners
of the coal companies, and that a part at least of their profits from
the contracts were derived from freighting the coal out of the
State. The Supreme Court, disclaiming prejudgment of the real
bearing of these contracts upon the case, held that they appeared
to be sufficiently relevant to warrant their compulsory presenta-
tion. We gather from this decision that, while production and
sale within a State is not in itself interstate commerce,” where a
common carrier is itself a producer and buyer of commodities
forming a substantial part of its profitable interstate freight busi-
ness the entire transaction may be viewed as on its face a matter
Of interstate commerce.
69. The Interstate Commerce Act contains several provisions
looking to the investigation of railways, and the publishing of
information. The Act requires railways to publish their rates,
and this is now enforceable by penalties under the Elkins Act.f
So far as an investigation relates to a suit it is only necessary
to note here that the Commission is authorized to demand all tes-
timony and documents relevant to the issue, and that an original
defect in the Act whereby witnesses could refuse to give self-in-
criminating testimony owing to lack of protection from prosecu-
tion: is now cured by amendment.S
The Commission is authorized to require annual reports of a
very comprehensive nature, but thus far has contented itself with
demanding statements of income and expenditure. It complains
that owing to the absence of statutory penalties for non-compli-
ance some of the companies do not make satisfactory returns,
and as it is now attempting to compel the filing of certain reports
* See U. S. v. E. C. Knight Co., 156 U. S., 1.
+ Feb. 19, 1903.
f Counselman v. Hitchcock, 142 U. S., 547.
§ Brown v. Walker, 161 U. S., 591.
| Rep. I. C. C., 1903, p. 17.
58
we may expect an adjudication in regard to its powers in this
direction.
The Supreme Court has not yet construed the blanket clause
ordering railway corporations to return “specific answers to all
questions upon which the Commission may need information,”
but we assume that it will not transmute “need” into “desire,”
and thus open the door to the forcible investigation of irrelevant
matters.
The Act of March 3, 1901, requires all corporations subject to
the Interstate Commerce Act to report to the Commission “all
collisions of trains, or where any train or part of a train acci-
dentally leaves the track, and of all accidents which may occur
to its passengers or employees while in the service of the common
carrier and actually on duty.”
Reports of
accidentS.
The permanent
way, etc.
FEDERAL POWER IN RESPECT OF THE SERVICE OF RAILWAYS.
70. When we say that a railway must be properly constructed
and maintained; that it cannot be abandoned at pleasure; and
that its administrators must proffer a reasonably safe and ade-
quate service we indicate obligations definable and enforceable by
public authorities.
In the case of a line affording interstate transportation the
question arises as to the respective jurisdictions of Federal and
State authorities in the premises: Understanding, of course, that
there is no room for conflict in any constitutional sense, but that
each has its proper province.
Framing the question of present interest—How far is the Fed-
eral Government competent to enforce such obligations with re-
spect to an interstate line with which it has no charter relations
that might perhaps give it a peculiar authority?
71. Public powers regarding location, construction, main-
tenance and improvement of the permanent way are presumably
State and not Federal, because these matters are not interstate
commerce. They simply involve the preparation and keeping of
routes.
“It has never been supposed,” says the Supreme Court, “that the
dominant power of Congress over interstate commerce took from
the States the power of legislation with respect to the instruments
of such commerce so far as the legislation was within its ordinary
59
police powers. Nearly all the railways in the country have been
constructed under State authority, and it cannot be supposed that
they intended to abandon their power over them as soon as they
were finished. The power to construct them involves necessarily
the power to impose such regulations upon their operations as a
sound regard for the interests of the public may seem to render
desirable. In the division of authority with respect to interstate
railways Congress reserves to itself the superior right to control
their commerce and forbid interference there with ; while to the
States remains the power to create and regulate the instru-
ments of such commerce, so far as necessary to the conservation
of the public interests.”
The syllabus of a later case recites that New York statutes
regulating the heating of cars and requiring guard posts, etc., on
railroad bridges and approaches “were passed in the exercise of
powers resting in the State in the absence of regulation by Con-
gress.”f The syllabus is incorrect. The only provision before
the Court was the one requiring the heating of cars, and, as we
shall presently see, Congress has so perfect a right to regulate
cars employed in interstate traffic as to render State action per-
missive. Had the Court construed the bridge clause it should have
found the State’s jurisdiction exclusive in accordance with the
principle above stated.
72. To the rule denying Federal jurisdiction in regard to the
permanent way there is a notable exception.
In virtue of the commerce clause the Federal Government is Navigable
invested with sufficient control over the waters of the country, so “
far as these are routes of interstate and international intercourse,
to warrant it to determine whether, or in what manner railway
lines shall be carried across them.:
So absolute is the Federal right to maintain navigation to
whatever degree that an authorization to impair it must be deemed
permissive and therefore revocable. If a structure be built over
navigable water by State or Federal authority, and in compliance
with current Federal regulations Congress may thereafter compel
its alteration, or even its removal to satisfy what is decided to be
the greater needs of navigation.S
73. So far as interstate commerce is concerned there seems no Abandonment
of railway.
*Louisville & Nashville R. v. Kentucky, 161 U. S., 702.
+ New York, New Haven & Hartford R. v. New York, 165 U. S., 628.
# See Lake Shore R. v. Ohio, 165 U. S., 365.
§ See Wheeling Bridge Case, 18 How., 518,
60
ground for a Federal right to prevent a State from authorizing
the abandonment of a railway within its jurisdiction.
This must be so in the case of ordinary highways, and I per-
ceive no radical difference in the case of a railway, though the
Government might insist upon the performance of a mail con-
tract.
It is in the actual service of interstate transportation that we
look for the main Federal interest in the premises.
We have seen that a State is forbidden to prevent through ser-
vice,” and while it may be questioned whether Congress could
directly compel a State corporation to put on through trains, in
some cases it can effect this result by regulations forbidding need-
less transhipment of mails or perishable freight.f
A train or a car employed in transporting persons or property
from State to State is in interstate service, and Congress may,
therefore, prescribe reasonable regulations in regard to its equip-
ment and management. This power has been exerted in the fol-
lowing statutes:
The Act of Mar. 3, 1873, requires railway companies carrying
animals from one State to another to unload them at least every
twenty-eight hours for “rest, water and feeding.”
The Act of March 2, 1893, and its amendments directs railway
companies to fit cars engaged in interstate service with automatic
couplers, continuous brakes, etc.;
Rolling stock which is used indiscriminately in interstate and
local traffic must necessarily conform to lawful Federal standards
of equipment. No State can impose regulations impairing Fed-
eral standards, and it would be improper, and probably unlawful,
for a State to superadd requirements for purposes sufficiently
attained by Federal law.
74. The Interstate Commerce Act forbids unjust discrimina-
tion and unreasonable preference in traffic facilities as well as
in rates, and a new section of March 2, 1889, enables a shipper
proving unfair treatment in this regard to obtain an order from
a court commanding the railway company “to move and transport
the traffic, or to furnish cars or other facilities.”
The Supreme Court has not yet been required to construe this
* SS. 22, 42.
+ See Int. Com. Act, S. 7.
f See Voelker v. C. M. & S. P. R., 129 Fed. R., 522; U. S. v. Geddes, 131 Fed. R., 452; Johnson v
Southern Pacific R., Supreme Court, Dec. 1904, -
Transpor-
tation.
61
branch of the statute,” and, like rate discrimination cases, each
case must be adjudicated on its merits. Recently a District Court
ordered a railway company to supply a mining company with
what it adjudged to be the proper complement of cars.f
74. The main constitutional ground upon which a company
can resist Federal imposition of an expensive duty is that it is so
unreasonable as to amount to a deprivation of property without
“due process of law,” and in reviewing State legislation on the
same subject the Supreme Court necessarily gives valuable com-
ments on the extent of Federal power, for the Constitution en-
joins “due process” upon the United States as well as upon the
States.
TRANSPORTATION RATES.
The most interesting topic of this examination involves the
competency of the Federal Government to deal with the income
of railway property by prescribing rates, or regulating the rate-
making powers of the companies.
Except where passenger rates are mentioned, freight rates are
the subject of our consideration, because these are at once the
chief source of income and the prolific cause of controversy.
LEGISLATIVE RATE-MARING.
76. An organic distinction between systems of government
rate-making is drawn by our Supreme Court. “It is cne thing,”
says the Court, “to inquire whether rates which have been charged
and collected are reasonable—that is a judicial act; but an
entirely different thing to prescribe rates which shall be charged
in future—that is a legislative act.”$
The judicial act, which is simply the adjudication of a claim for
overcharges, does not call for discussion here. It is the legislative
act that concerns us.
Note that the “legislative act” is not necessarily a statutory
schedule of rates: The legislature can delegate the actual nam-
ing of rates to a commission. Note also that this act is subject to
judicial review, as we shall see; “and the extent of judicial inter-
ference is protection against unreasonable rates.”
* See Int, Com, Comm. v. Detroit, etc., R., 167 U. S., 644,
+ Kingwood Coal Co. v. W. Wa. R., 125 Fed. R., 252.
# See M. & S. L. R. v. Emmons, 149 U. S., 364; Charlotte, etc., R., v. Gibbes, 142 U. S., 886; N.
Y. & N. E. R. v. Bristol, 151 U. S., 556.
§ Int. Com. Comm, v. C. N. O., etc., R., 167 U. S., 499.
| C. & G. T. R. v. Wellman, 143 U. S., 344,
62
Rate-making
in States.
The several methods of legislative rate-making may be roughly
classified as: - -
Directive—where the government names the rates;
Co-operative—where the companies submit schedules to the
government for approval. - - . . . . .
Corrective—where the government changes a rate upon com-
plaint and proof of unreasonableness.
The first method is usually comprehensive and the second may
be measurably so. The third is adventitious. .
The several methods are not necessarily alternative, but may
be employed in combination. - -
77. The directive method is exemplified in the proclamation of
maximum rates for long or indefinite terms. In England and in
France maximum rate schedules are fixed by law but in each coun-
try actual charges are, for the most part, lower than legal rates.
In several States of the Union maximum rates have been fixed
by the legislature directly, or by an authorized commission. -
In France changes in railway tariffs are effected by the co-
operative method. When a change of rates within the legal maxi-
mum is desired, the company, upon due notice, submits to the
government a schedule which is either rejected, confirmed as pre-
sented or sent back for alteration.
The corrective method is employed in several States of the
Union. Upon complaint made commissions are authorized to
alter a given rate pending appeal to the Courts. But the Supreme
Court has decided that the commission must give a fair hearing
to both parties—the question being essentially judicial.”
78. Before taking up the subject of Federal rate making it is
advisable to note the powers of the States in this regard. -
Each State is competent to determine the rates for railway
traffic beginning, continuing and ending within its boundaries,
but it has no such power in regard to traffic passing into, from
or through the State,f or passing beyond the State in course of
transit between local terminals.} -
1n determining rates a State enjoys powers of a dual nature.
Dealing with the railway as a common carrier it may reduce to
terms the carrier's general obligation to proffer reasonable rates.
Dealing with the railway as one of its corporations it may
grant the franchise upon specific rate conditions. Such condi-
* C. M. & St. P. R. v. Minnesota, 134 U. S., 418.
+ Wabash R. v. Illinois, 118 U. S., 557. See also Covington Bridge v. Kentucky, 154 U. S. 217,
# S. 15. - - -
63
tions have nothing to do with the carrier's obligation. They are
simply part of a complete charter which railway promoters can
accept or decline at pleasure. In point of law the State is equally
entitled to fix a price list in the original charter of a manufactur-
ing company. -
In the absence of a charter contract the State may adjust rates
as changing conditions require, but neither the legislature itself,
or any administrative body instituted by constitution or statute
can fix a rate which shall be free from judicial review,” and rates
depressed to a figure which would deprive the corporation of
property without due process of law will be invalidated by the
Federal Courts as being contrary to the Fourteenth Amendment
of the Constitution.f
79. Coming to Federal power, we find that in some of the
transcontinental railway charters Congress has expressly re-
served the right to fix rates in certain contingencies.
The Supreme Court holds that, so long as this right is not
exercised, the States which now govern what, when the lines were
built, was Federal territory, have full power to regulate rates
within the jurisdiction, but it intimates that perhaps Congress
could oust the State power by claiming its charter rights. Now,
it is generally true that a legislature chartering a corporation
enjoys substantial powers over it so long as it endures. This
proposition may well have important applications in regard to the
sections of lines chartered by Congress, and now included in
States, but I am strongly inclined to maintain a State's right to
regulate the rates of local traffic, whatever the origin of the cor-
poration. Such traffic is left by the Constitution within its exclu-
sive jurisdiction. It is commerce in a State, not among the States.
I should say that when a State Government succeeds to the
control of Federal territory the Constitution of the United States
confirms a right to deal with the whole body of local commerce,
unimpeachable by any act of Congress. The Federal railway
charter is to this extent modified by the automatic operation of
the supreme law of the Constitution. To state the proposition in
another way: The charter is presumably granted in contempla-
tion of existing political conditions. The act of Congress admit-
ting the new State operates to repeal whatever terms of the char-
* Chicago, M. & S. P. R. v. Minnesota, 134 U. S., 456.
+ Smyth v. Ames, 169 U. S., 466.
# See Smyth v. Ames, 169 U. S., 519; Reagan v. Trust Co., 154 U. S., 416.
º:
rights In
Federal
charters.
64
ter are inconsistent with the normal jurisdiction of a State of the
Union.
This view does not affect the military or postal purposes of the
Federal Government in authorizing the transcontinental roads.
These purposes the United States can promote with equal free-
dom in any part of the country.
Fºral 80. If there is a Federal power to fix interstate rates of State
making, corporations it must be based entirely on the fact that the com-
pany is a common carrier, for, as a corporation, it is subject only
to the peculiar power of the chartering State.
It would be a waste of time to question this power—absurd
to argue that a governmental right to determine the charges of
railroad companies for service within a State disappears in the
Case of interstate service.
Referring to the transportation conditions which prompted the
Interstate Commerce Act the Supreme Court says: “There were
three obvious and dissimilar courses open for consideration. Con-
gress might itself prescribe the rates; or it might commit to some
subordinate tribunal this duty; or it might leave with the com-
panies the right to fix rates, subject to regulations and restrictions,
as well to that rule as old as the existence of common carriers,
to wit, that rates must be reasonable.”
The right of the Federal Government to fix interstate railway
rates in nowise commends the exercise thereof. It merely per-
mits inquiry, whether there are methods whereby action may be
at once lawfully and usefully undertaken.
Directive 81. In discussing directive rate-making by the United States
“ it will be assumed that the rates must be impartial in the ordin-
ary sense, that is to say, A must not be unduly preferred to B in
respect of service on a particular line. Furthermore, a peculiar
obligation of impartiality might attach to a Federal effort to
establish rates.
Whilst our interstate rates are fixed as at present by the cor-
porations the condition of impartiality is satisfied so long as each
one subjects none of the patrons of its line to undue discrimina-
tion. The patrons of a railway between Mississippi and Louisi-
ana cannot complain that they are compelled to pay proportion-
ally higher rates than the patrons of a line running between New
*Int. Com. Comm., v. C. N. O., etc., R., 167 U. S., 494.
Hampshire and Massachusetts. But were the Federal Govern-
ment to assume rate-making power, might it not assume also an
obligation of national impartiality?
Certainly the various sections of our country would then de-
mand equal treatment at the hands of the central authority, and
it seems that a certain equality of treatment would be enjoined
by constitutional law. No more striking regulation of interstate
commerce could be imagined than a schedule of railway rates
prepared or confirmed by the government, and the Supreme Court
holds that regulations must be sufficiently uniform to escape the
reproach of invidious discrimination.* - -
To make a comprehensive schedule of interstate rates on lines
of national uniformity would be a quite impossible task if literal
uniformity be required. Nor would literal uniformity be easier
should the Government adopt the co-operative method and pass
upon schedules submitted by the companies.
Conceding that the uniformity required in a directive or a
co-operative system is equitable and not literal we avoid an insur-
mountable obstacle, but many difficulties vex the way to a just and
practicable scheme. •
82. At present the leading proposition for government rate-
making commends the corrective method.
Some years ago the Interstate Commerce Commission pro-
nounced a certain rate extortionate, and ordered the railway
company to charge no more than what it defined to be the just
maximum rate pending a decision of the courts upon its ruling.
On appeal the Supreme Court held that the Commission was not
authorized to fix a rate even subject to judicial confirmation,
much less to impose a rate provisionally,i and in a later case the
Court denied the competency of the Commission to fix a maximum
rate for the future.:
The result is that the Commission is simply authorized to pro-
nounce a given rate excessive. Whereupon the company may ap-
peal to the courts, and continue the rate until final judgment.
If this shall be adverse to the rate the company is free to
make a new one, which, peradventure, may provoke a new com-
plaint and a repetition of the proceedings.
Since the adverse decisions of the Supreme Court the Commis-
sion has repeatedly requested rate-making powers. The last pro-
* S. 17.
+ C., N. O. & T. P. R. v. Int, Com. Comm., 162 U. S., 184.
# Int. Com. Comm. v. C., N. O. & T. P. R., 167 U. S., 479.
Corrective
method.
66
Quarles-
Cooper Bill.
position of this sort is embodied in the Quarles-Cooper Bill,"
which provides that the Commission may reduce a given rate after
hearing a complaint preferred by the Government or a shipper,
which rate shall be the legal charge for an indefinite period if
Ino appeal to the courts be taken. In case of appeal the Commis-
sion’s rate becomes operative “within thirty days after notice; or,
in case of proceedings for review, as hereinafter provided, then
Within sixty days after notice.” As the proceedings to test the
legality of the rate may be carried to the Supreme Court it might
happen that for a time a railway company would be compelled to
transport freight at rates finally pronounced unreasonably low,
In this event the company would sustain an unreasonable loss
for which the bill provides no method of indemnification.
Perhaps a scheme of this sort might be so devised as to satisfy
the requirement of “due process of law”;* but there is not fair
process of law where a company has been obliged to forego large
sums of money which in the judgment of the highest court should
have been paid into its treasury.
I am not called upon to consider the workings of the Quarles-
Cooper plan from an economic standpoint, but I venture a com-
ment on the corrective method of rate-making generally.
A railway company may be presumed to determine the rate for
a particular class of freight with regard to its business as a whole,
and the larger the business the more difficult is it for an outsider
to gauge the relative propriety of the rate.
Now, under a comprehensive method of rate-making it may
be supposed that the rates for each class of freight are so adjusted
as to assure a fair return from the whole business. But, where a
rate for a particular class is scrutinized on a complaint made,
there is less likelihood of an harmonious adjustment.
If the rate on grain be reduced the company will try to recoup
on lumber. The lumber rate is then attacked, and cannot be de-
fended because of losses on grain : The lumberman cannot be
required to suffer for the farmer’s benefit.
In fine, the general schedule is so open to attack from every
quarter that it is likely to become a patchwork of unrelated items,
unless each complaint is carefully adjudicated with reference to a
comprehensive principle of rate-making.
* 58 Cong., 2d Sess. (1903–4), H. R. 6273. S. 2439.
174 usee Chicago, M. & S. P. R. v. Minnesota, 134 U. S., 418, San Diego Land Co. v. National City
67
*º-º-º- ---------------,-- **-a---
- | -
83. In determining rates by whatever method the Federal Gov. ºpus
ernment would be as firmly bound as the States by the constitu- g:
tional rule that none shall be deprived of property without “due
process of law.” º
What rates would involve an unlawful deprivation is a ques-
tion too dependent upon complex circumstance to permit of a
comprehensive answer, but several decisions of the Supreme
Court in regard to rates imposed under State laws are of value.
In Smyth v. Ames” the Court decided that certain maximum
rates fixed by a Nebraska statute were unreasonably low, because
the railway company proved that they would not yield a “fair re-
turn” on the value of that which it employed for the public con-
Venience.
The State of Michigan, having enacted a maximum rate law,
was held incompetent to order the railroads to issue thousand-
mile tickets under conditions which would give certain persons
“a right of transportation for a less sum than the general rate
provided by law.” The Court declared that the legislature could
not “enact a law making maximum rates, and then proceed to
make exceptions to it in favor of such persons or classes as in the
legislative judgment or caprice may seem proper. What right
has the legislature to take from the company the compensation it
would otherwise receive for the use of its property in transporting
an individual or classes of persons over its road, and compel it to
transport them free or for a less sum than is provided for by the
general law? Does not such an act, if enforced take the property
of the company without due process of law?”;
84. While the legality of a government rate must be consid-
ered with regard to the facts in each case, the Supreme Court
makes the following suggestions of principle:
“It cannot be said that a corporation is entitled, as of right,
and without reference to the interests of the public, to realize a
given per cent. upon its capital stock. * * * The public can-
not properly be subjected to unreasonable rates in order simply
that stockholders may earn dividends.”:
“We hold * * * that the basis of all calculations as to
the reasonableness of rates to be charged by a corporation main-
taining a highway under legislative sanction must be the fair
Value of the property being used by it for the convenience of the
* 169 U. S., 466.
+ Lake Shore R. v. Smith, 173 U. S., 684.
# Covington Turnpike v. Sandford, 164 U. S., 596-7.
68
public. And in order to ascertain that value, the original cost
of construction, the amount expended in permanent improve-
ments, the amount and market value of its bonds and stock, the
present as compared with the Original cost of construction, the
probable earning capacity of the property under particular rates
prescribed by statute, and the sum required to meet operating
expenses, are all matters for consideration, and are to be given
such weight as may be just and right in each case. We do not
say that there may not be other matters to be regarded in estimat-
ing the value of the property. What the Company is entitled to
ask is a fair return upon the value of that which it employs for
the public convenience. On the other hand, what the public is
entitled to demand is that no more be exacted from it for the use
of a public highway than the services rendered by it are reason-
ably worth.”
“Each case must be determined by its own considerations and
while the rule stated in Smyth v. Ames is undoubtedly sound as
a general proposition that the railways are entitled to a fair re-
turn upon the capital invested, it might not justify them in charg-
ing an exorbitant mileage in order to pay operating expenses, if
the conditions of the country did not permit it.”f Can charges
be truly called “exorbitant” when these are necessary for the
maintenance of the public service? Can the “conditions of the
country” ever compel a corporation to operate its system at a loss?
ºf 85. Whether any method of government rate-making would
* tend to improve the railway service of the republic as a whole is
a question beyond the province of this examination. I venture to
observe, however, that whatever beneficial results may attend
public rate-making in countries like Germany and France is not
necessarily an encouragement to us, even if embarrassments inci-
dent to the constitutional requirement of uniformity should be
minimized.
In the first place the vast area of our country and the wide
diversity of its interests magnify the difficulties of a central rate-
making authority. * * -
In the Second place public rate making is a matter of course
in countries where the government owns the lines, as in Germany;
and where, as in France, the government is financially interested
in the railways its supervision of rates is marked by a better
* Smyth v. Ames, 169 U. S., 546–7.
f Minn. & S. L. R. v. Minnesota, 186 U. S., 268.
69
balanced consideration for both investor and shipper than is
likely to be the rule in this country, where the government must
constantly decide between contending parties of enormous poli-
tical power without the steadying influence of a public fiscal in-
terest.
Finally the whole problem is much simplified in countries
where legislative and administrative acts have a constitutional
finality: Where fixed rates are legal rates for all the courts can
Say.
REGULATION OF COMPANY RATE-MAIKING,
86. Passing from Federal powers to fix interstate transporta-
tion rates—powers as yet unexercised—we come to Federal regu-
lation of rate making by the companies.
We have seen that the common carrier’s obligation to charge
reasonable rates is sufficiently impressed upon interstate trans-
portation to warrant common law actions in State courts for
recovery of overcharges in cases where a Federal statute does
not cover the ground, but I have questioned the right of the
Federal Government to proceed against a carrier on this score
without statutory authority.”
At all (ºvents the enactment of the Interstate Commerce Act
and the Anti-Trust Act denotes a Federal interest in rates suf-
ficiently broad to discourage speculation as to what interest the
Government might have in the absence of legislation; and the
bearing of these Acts on the rate question will now be considered.
The Interstate Commºnverce Act.
87. As my examination is directed mainly to questions of con-
stitutional power I shall consider only the elementary questions
suggested by the Interstate Commerce Act, and these only so far
as general principles have been considered by the Supreme Court.
The Interstate Commerce Act is largely addressed to the
enforcement of the twofold duty of railroads to charge reasonable
rates for all services and undiscriminating rates for like services,
and most of the complaints preferred to the Commission allege
a violation of this duty.
There is an interesting difference between a complaint pre-
ferred by an individual and one preferred on behalf of the public.
A shipper complains that a rate is unreasonable. The railroad
* S. 34.
70
replies that it may be unsatisfactory, but is not unreasonable, in
a legal sense, in view of the corporate responsibilities to stock-
holders and to the public at large. When a railroad corporation
thus declares that its ability to determine the question of reason-
ableness is greater than that of a dissatisfied patron intent upon
his particular interest, it assumes a strong position, and puts a
heavy burden of proof upon the shipper.
Where a complaint is preferred on behalf of the public a larger
interest is brought into play, and, while the burden of proof is
not shifted, it is not so embarrassing.
Usually the act complained of is prompted by considerations
of economical management not unreasonable from the stand-
point of the company’s interests. Such considerations are pre-
sumably entitled to respect unless they conflict with public or
private interests apparently of equal merit, when the courts must
finally supervise the adjustment.
We have here the familiar controversy between buyer and
seller, with this legal peculiarity, however, that the seller of
transportation, being in a sense a public servant, is in the last
analysis obliged to vend its services at a reasonable price.
88. The first section of the Act declares generally that rates
shall be “reasonable and just.”
The Supreme Court has heard but one cause distinctly in-
volving this broad requirement and then it overruled the Com-
mission’s opinion that a terminal charge, reasonable if imposed
by an independent agent, was unreasonable because of the cir-
cumstances under which it was imposed by the railway company.”
89. The second section forbids “unjust discrimination” by
“special rate, rebate, drawback or other device” in regard to “like
and contemporaneous service in the transportation of a like kind
of traffic under substantially similar circumstances and condi-
tions.”f
In the only Supreme Court opinion dealing with this section
we read: “It was the purpose of this section to enforce equality
between shippers, and it prohibits any rebate or other device by
which two shippers shipping over the same line, the same dis-
tance, under the same circumstances of carriage, are compelled
to pay different prices therefor.” Referring to the recurrence of
the phrase “substantially similar circumstances and conditions”
“Reasonable
and just *
rates.
“Unjust dis-
Crimination.”
* Int. Com. Comm. v. C., B. & Q. R., 186 U. S., 320.
+ See also Elkins Act, Feb. 19, 1903.
71
in the fourth section the Court said: “For this case it is enough
to hold that that phrase, as found in section 2, refers to the mat-
ter of carriage, and does not include competition.”
90. The third section forbids the giving of “undue or unrea-
sonable preference or advantage to any particular person, com-
pany, firm, corporation or locality, or any particular description
of traffic” or the subjection of any person, etc., to “undue or un-
reasonable prejudice or disadvantage.”
In construing this section the Supreme Court has held, con-
trary to the Commission’s opinion, that parties of travelers may
be carried at a lower rate for each person than is charged for a
single traveler.f
This decision, with its significant statement that Congress did
not intend “to ignore the principle that one can sell at wholesale
cheaper than at retail,”f affirms that there is no general obliga-
tion to carry all like freight at uniform rates regardless of the
quantity offered, though cases of exceptional discrimination war-
rant exceptional rebuke.
91. The fourth section forbids the charging of “greater com-
pensation in the aggregate for the transportation of passengers
or of like kind of property, under substantially similar circum-
stances and conditions, for a shorter than for a longer distance
over the same line, in the same direction, the shorter being in-
cluded within the longer distance: but this shall not be con-
strued as authorizing any common carrier within the terms of
this act to charge and receive as great compensation for a shorter
as for a longer distance.” In special cases the commission is au-
thorized to relieve a common carrier from the operation of this
section. This “long and short haul” section has provoked con-
siderable litigation.
All the conclusions of the Commission that have been brought
before the Supreme Court have been adverse to the railways, but
each one has been overruled because of its misconception of the
phrase “substantially similar circumstances and conditions.”S
The true meaning of this phrase is given in the following
passages: “Competition which is real and substantial, and exer-
cises a potential influence on rates to a particular point, brings
into play the dissimilarity of circumstance and condition pro-
* Wight v. U. S., 167 U. S., 538.
+ Int. Com. Comm. v. B. & O. R., 145 U. S., 263.
+ 145 U. S., 276.
§ Cincinnati R. v. Int. Com; Comm;, 162 U. S., 184. Texas & Pacific R. v. Int. Com. Comm., 162
U. S., 197. Int. Com. Comm. v. Ala; Midland R. R., 168 U. S., 144. Int. Com. Comm. v. Clyde SS. Co.
181 U. S., 29. See also Louisville & N. R. v. Behlmer, 175 U. S., 648.
** Undue
preference.”
Long and
short haul.
72.
Comments
On the
Act.
vided by the statute, and justifies the lesser charge to the more
distant and competitive point, than to the nearer and non-com-
petitive place, and * * * this right is not destroyed by the
mere fact that incidentally the lesser charge to the competitive
point may seemingly give a preference to that point, and the
greater rate to the non-competitive point may apparently engen-
der a discrimination against it.”
“The settled construction of the Interstate Commerce Act
allowing carriers to charge the lesser rate for the longer than for
the shorter distance, if at the further point the lesser rate was
justified by a substantial dissimilarity of circumstances and con-
ditions there prevailing, consequent upon real competition.”f
92. In reviewing the Supreme Court decisions under the rate
clauses of the Commerce Act we are deeply impressed by the
almost uniform rejection of the Commission’s conclusions. How
fortunate that the Court found that the Act did not grant rate-
making powers to the Commissioners since it has been obliged to
discredit most of their rate-making theories!
It is questionable whether these rejected theories would be re-
habilitated by striking out “under substantially similarly circum-
stances and conditions” from the fourth section, with intent to
bar absolutely a lesser charge for a longer distance. For the Su-
preme Court broadly affirms that the Act recognizes the right of a
railway company to make each particular rate with a comprehen-
sive regard to its business as a whole, and in my opinion, this
principle is embodied in its constitutional right to charge reason-
able rates.
If a greater charge for a shorter haul be unreasonable it is
now unlawful: And so also if certain shippers be unduly favored.
But where greater charges and special rates are now reasonable
because they are based upon business necessities, are they not
substantially founded on a constitutional right which Congress
cannot impair?
93. It will be observed that the rate clauses of the Act bear
chiefly upon unjust discrimination.
Malicious discrimination is plainly unjust, and so is the favor-
ing of interests with which railway officials or stockholders are
connected, or which extort favors by undue pressure. It is note-
worthy that the practices most deserving censure have been, ap-
parently, the least affected by the Act.
* East Tenn., etc., R. v. Int. Com. Comm., 181 U. S., 19.
+ Int. Com. Comm. v. Louisville R. R., 190 U. S. 284,
73
Apart from such vicious offenses, discrimination usually
means the underbidding of a rival railway for freight seeking the
cheapest route. Evidently if the railway managers are informed
by the Anti-Trust Act that competition is imperative and by the
Interstate Commerce Act that they must not compete by under-
bidding, they are placed in a dilemma. This has given rise to the
familiar suggestion that in the long run the interests of the com-
munity would be better served by allowing the pooling of traffic
under reasonable supervision.
The Anti-Trust Act.
94. On July 2, 1890, Congress passed an Act “to protect com-
merce against unlawful restraints and monopolies.”
The second section condemns “every person who shall monopo-
lize or attempt to monopolize, or combine or conspire to mono-
polize, any part of the trade or commerce among the several States
or with foreign nations.” “Monopoly” sums up most of the popu-
lar objections to conditions in “restraint of trade,” but it has a
special meaning in jurisprudence.
“Monopoly” may mean commercial control by a single per-
son, while a condition in “restraint of trade” is in common speech
brought about by means of contract, combination or conspiracy.
Monopoly by crown grant, long since condemned in the Case
of Monopolies,” has no analogue in the United States.
Monopoly by act of Parliament has an American analogue in
the patent laws. These do not affect railways, though they are
of substantial importance in certain phases of the question of
industrial trusts. There is also the general legislative right to
grant monopolies except as restrained by constitutional limita-
tions. This right need not be dwelt upon here. Suffice to say
that Federal power over interstate commerce cannot be tram-
meled by a monopoly granted by a State, and that Congress itself
is not subject to anti-monopoly limitations in granting railway
charters.
“Virtual monopoly,” a rather vague term employed by Lord
Ellenborough in Allnutt v. Inglisi to denote the occupation of a
commanding business site, as a single wharf in a harbor, is fre-
* 11 Rep., 84.
+ 12 East, 527.
Monopoly.
74
Quently employed to denote the actual supremacy in matter of rail
transportation which nearly every railway company enjoys, al-
ways over a part of the territory it serves, and sometimes over the
entire rail traffic in a vast region.
Of course, the virtual monopoly of a railroad is not attacked
by the Anti-Trust Act.” And it has not yet been judicially deter-
mined just what business arrangements and economic conditions
this clause is intended to strike.
95. The first section of the Anti-Trust Act condemns “every
combination in the form of trust or otherwise, or conspiracy, in
restraint of trade or commerce among the several States or with
foreign nations.” The Supreme Court has considered this clause
in a number of cases, but I shall note here only the three govern-
ment suits brought against railways.
The Court has held that railroads are within the purview of
the Act, and in two causes presenting substantially similar facts
has decided that formal rate agreements between competing rail-
ways operate to “restrain trade” within the statutory meaning.i.
The third case is Northern Securities Co. v. the United
States...}. In 1901 certain stockholders of the Great Northern and
Northern Pacific railways organized the Northern Securities
Company under the Corporation Act of New Jersey. They, and
other stockholders, transferred their railway shares to the Com-
pany, receiving its stock in exchange. By virtue of these trans-
actions and by the purchase of certain shares for cash the Com-
pany became the holder of a controlling interest in each railway
corporation. The Attorney-General of the United States there-
upon filed a bill against the Securities Company and its organ-
izers, alleging that they had effected a combination restraining
interstate trade. The Supreme Court upheld the Government's
contention and decreed that the Company should not vote the
stock at any meeting of either railway company. §
I have given only the gist of these railway cases in order to
accentuate the points actually determined.
1. Two or more railway companies are forbidden to make
formal rate agreements in restraint of competition. This is a
contract in restraint of trade.
2. Stockholders in two or more companies are forbidden to
Combination.
The Associa-
tions cases.
Northern Se-
curities case.
* See Freight Association v. U. S., 166 U. S., 335.
† Freight Association Case, 166 U. S., 290. Joint Traffic Association Case, 171 U. S., 505.
+ 193 U. S., 197.
§ The subsequent controversy over the ownership of certain railway stock held by the Securi-
ties Company I do not discuss.
75
organize a corporation and transfer to it, in exchange for its own
stock, a sufficient number of the shares of each company to enable
the corporation to choose both railway directorates, and thereby
control both lines to this extent. This is a combination or con-
spiracy in restraint of trade.
96. In the Associations cases all the judges agreed that the
rate agreements between the competing lines amounted to a re-
straint of trade in the broad sense of abating competition, but on
the question of their legal standing the Court split as nearly even
as possible without splitting a judge.
Four judges declared that the agreements were not condemned
by the Act because they did not unreasonably restrain trade and,
therefore, were valid at common law.
Five judges refused to consider whether the agreements were
reasonable or unreasonable from the common law standpoint.
They decided that the Anti-Trust Act did, in terms, condemn all
contracts literally in restraint of trade without regard to common
law distinctions.
In the Northern Securities case the statutory meaning of
“restraint of trade” was again considered.
Mr. Justice Harlan, speaking for Justices Brown, McKenna
and Day, reaffirmed the proposition that the act was not limited to
unreasonable restraints.”
Mr. Justice White, speaking for the minority, merely referred
to the anti-common law rulings in the Associations cases, and de-
clared that the cases themselves were irrelevant to the issue.i.
Mr. Justice Brewer, of the majority in the Securities case.
differed radically from his colleagues on the statutory meaning of
“restraint of trade. “First,” said he, “let me say that while I
was with the majority of the court in the decision in United States
v. Freight Association, 166 U. S. 290, followed by the cases of
United States v. Joint Traffic Association, 171 U. S. 565, * * *
and while a further examination (which has been induced by the
able and exhaustive arguments of counsel in the present case)
has not disturbed the conviction that these cases were rightly de-
cided, I think that in some respects the reasons given for the
judgments cannot be sustained. Instead of holding that the Anti-
Trust Act included all contracts, reasonable or unreasonable, in
Restraint of
trade.
* 193 U. S., 331.
+ 193 U. S., 387.
MIr. Justice
Brewer's
Opinion.
76 * * * * * * ~ *.*.
restraint of interstate trade, the ruling should have been that the
contracts there presented were unreasonable restraints of inter-
state trade, and as such within the scope of the act. That act,
as appears from its title, was leveled at only ‘unlawful restraints
and monopolies.” Congress did not intend to reach and destroy
those minor contracts in partial restraint of trade which the long
course of decisions at common law had affirmed Were reasonable
and ought to be upheld. The purpose rather was to place a statu-
tory prohibition with prescribed penalties and remedies upon
those contracts which were in direct restraint of trade, unreason-
able and against public policy. Whenever a departure from com-
mon law rules and definitions is claimed, the purpose to make the
departure should be clearly shown. Such a purpose does not ap-
pear and such a departure was not intended.”
I find no direct encouragement for railway interests in Mr.
Justice Brewer’s modified views, not only because railway agree-
ments are not likely to be treated as “minor contracts,” but be-
cause the judge affirms that the agreements in the Association
cases were essentially unreasonable, though it did not appear that
the rates imposed thereunder were extortionate.
But even if Mr. Justice Brewer’s modification be of greater
value to railway interests than I think, we are not apprised that
the Chief Justice and Mr. Justice Peckham, who were of the
majority in the Association cases, subscribe to it. Mr. Justice
White's minority opinion in the Northern Securities case, in which
these judges concur, does not reopen the common law controversy
of the Association cases. It differentiates those cases from the
matter in hand and deals with this in another Way.
97. If I am right in assuming that the rigid interpretation
of “restraint of trade” in the Association cases is not broadly re-
laxed by the Securities case there remains a blemish on the Anti-
Trust Act not intended by its framers, as abundantly appears.
senator Hoar's Senator Hoar, who was a member of the Judiciary Committee
* that reported the Act of 1890, said in the Senate on January 6,
1903: “We undertook by law to clothe the Courts with the power
and impose on them and the Department of Justice the duty of
preventing all combinations in restraint of trade. It was believed
that the phrase “in restraint of trade,’ had a technical and well
understood meaning in the law. It was not thought that it in-
cluded every restraint of trade, whether healthy or injurious.
#193 U. S., 360.
77
“We were disappointed in one particular. The Court by one
majority, and against the very earnest and emphatic dissent of
some of its great lawyers, declined to give a technical meaning to
the phrase, “in restraint of trade,’ and held in one important case
that if trade were restrained by an agreement it was no matter
whether it were injuriously restrained or no.
“We did not put into our bill the words, “unlawfully and im,
properly restrained,’ because we were afraid it would be objected
that we were giving the Court a legislative power to declare what
was improper. We supposed the Court would interpret the law,
and that these things which had been by the established and recog-
nized law held to be contrary to public policy, like oppressive
agreements, agreements clearly wicked, though not prohibited by
existing law, agreements which were to destroy the purposes for
which the aggregate powers had been created, would be held to
be within its prohibition.”
The Anti-Trust Act ought to conform to the reasonable stan.
dard of the common law, and the persistent approval of the com-
mon law test by a strong minority of the Supreme Court gains
enough weight from Mr. Justice Brewer’s change of opinion to .
encourage a complete reargument of the whole question at the
earliest opportunity.
“From the recent case of Northern Securities Company v.
United States,” says Circuit Judge Gilbert, “it would appear that
when the questions involved in the opinions of the Supreme Court
in the two cases last above quoted [the Associations cases] shall
again come before that Court for consideration the majority of the
members of the Court may hold that the rulings in those cases
should have gone no further than to decide that the contracts there
presented were unreasonable restraint of interstate trade, and
were, as such, within the scope of the Act.”
Congress itself should remove the blemish on the Act by mak-
ing the illegality of a contract literally in restraint of trade de-
pend upon its unreasonableness.
98. Understanding that if two or more competing railway
companies make a formal rate agreement they violate the Anti-
Trust Act, as construed at present, we pass from the comparative-
ly narrow field of the Association cases to the Northern Securities Northern se.
CàSe Curities case.
*Ellis v. Inman, Poulson & Co., 131 Fed. Hep. 188.
78
Effect of Se-
curities de-
cision.
In this case there was no rate agreement, nor any proof that
the rates of the Great Northern and Northern Pacific were fixed
by the Company. But the Court, finding that the Company had
power to name both boards of directors, declared that it had inter-
est and ability to abate competition, and held that the several
defendants who had brought about this condition were parties to
an unlawful combination in restraint of trade.
The main line of defense in the Securities case was that the
Court had only to consider the acts of a New Jersey corporation,
duly organized, exercising lawful powers in the purchase of prop-
erty, and administering its property like any individual or cor-
poration.
The Court rejected this defense. It held that from the stand-
point of the Anti-Trust Act the company was party to a combina-
tion; that its acquisition of stocks was not a normal purchase by
an independent vendee, but was a colorable transaction designedly
and effectively constituting it a mere cover for Great Northern,
and Northern Pacific stockholders desirous of abating competi-
tion.
§
Agreeably to the rule that a decree operates directly only upon
the actual parties to the suit the decree in the Securities case is
not an order even to persons who might be carrying out arrange-
ments precisely like the one condemned. Yet all such, if such
there are, are warned that they are open to attack.
99. The decrees in the Associations, and the Securities cases
have discouraged the making of arrangements like those con-
demned, but it is a matter of common knowledge that the tendency
toward abatement of railway competition has increased since the
Associations cases, and has not been checked by the Securities
decision.
Conceding that Federal power is able to dissolve certain forms
of non-competitive arrangement, we are led to consider the rela-
tion of this power to non-competitive conditions of different com-
plexion. As this examination deals with railway transportation
I shall not consider the relation of the Securities decision to in-
dustrial conditions.
From the railway standpoint the immediate interest in the
case is its bearing upon transportation conditions sufficiently dif-
ferent from the Northern Securities plan to relieve them from
79
inclusion in the Court’s condemnation, yet sufficiently akin to it
in purpose or effect to provoke the inquiry whether they are
affected by an underlying principle of decision.
Conditions involving more or less abatement of competition
between railways are acquisition of control by one or more indi-
viduals, community of interest, and union of interests under State
authority. , , ,
100. If an individual buys enough stock in competing lines to
name both directorates he effects precisely the same result
obtained by the participants in the Northern Securities plan.
Clearly he is not a party to a combination under the first sec-
tion of the Anti-Trust Act. Is he a monopolist within the purview
of the second section?
In the Northern Securities case Mr. Justice Harlan dismisses
this question as irrelevant.” Mr. Justice Brewer, fearing, per-
haps, that the sweeping observations of his colleagues might logi-
cally embrace such a transaction, frees himself from possible com-
plicity. If “ ” * Mr. Hill,” says he, “was the owner of a
majority of the stock in the Great Northern Railway Company he
could not by any act of Congress be deprived of the right of invest-
ing his surplus means in the purchase of stock of the Northern
Pacific Railway Company, although such purchase might tend to
west in him through that ownership a control over both compa-
nies.”f As the four judges represented by Mr. Justice White also
approve this position, it may be safely said that, in the opinion of
the Supreme Court, Congress cannot forbid a man to invest his
money in railway stocks at pleasure.
Practically this opinion is of relatively little importance. In-
dividual ability to buy control of competing railroads is rare,
though not unknown. As a contribution to constitutional juris-
prudence the opinion is of substantial value, for it affirms that
abatement of competition between rival railroads is not neces-
sarily open to Federal attack.
Is the case different where a group of investors elect the
boards of directors of competing roads either by voting in person,
or by giving proxies to one or more individuals?
This action is more direct and effective than the community
of interest plan, and its suggestion of concert is more evident.
* 193 U. S., 333.
+ 193 U. S., 861.
Individual
purchase.
Control by
group of
individuals.
80
Community
of interest.
Purchase of
stocks by
authority of
foreign state.
Possibly this might be an unlawful combination in Mr. Justice
Harlan’s opinion, but I am sure the majority of the Court would
find the concert too loose, the restraint too indefinite to bring the
transaction within the purview of the Anti-Trust Act.
101. “Community of interest” is a rather vague term, yet it
suggests a familiar condition. Several capitalists acquire large
amounts of stock in two or more railroads which, were each con-
trolled by single interests, would compete strongly for traffic.
These units of capital are represented by directors in each of the
several directorates.
When stocks are thus distributed the motive for severe compe-
tition is destroyed. In fact, there is likely to be an apportion-
ment of traffic among the lines at rates regulated to a degree by
“community” influence.
I am of the opinion that the condition created by “community
of interest” is not only unaffected by the Northern Securities
decision, but is beyond the purview of the Anti-Trust Act itself.
Each stockholder is an owner of property. He is not forbidden
by the Act to acquire interests in each railroad, nor to endeavor to
harmonize these interests for his benefit. The mere fact that
other holders are doing the same thing does not change his state
of innocence into one of guilt. For all that appears the condition
which permits the administration of the railroads with a certain
degree of harmony is fortuitous, so far as the Federal Government
is concerned.
In these circumstances there is no evidence of the concerted
conception and execution of a scheme to restrain trade which the
Supreme Court discovered in the Northern Securities case: A
supposed ability to mitigate competition results from the indepen-
dent action of several persons. At most this is one of those remote
and indirect restraints which the Supreme Court has pronounced
to be beyond the purview of the Anti-Trust Act, a rule of interpre-
tation which must be maintained in order to preserve a large por-
tion of the business of the country from the perils of illegality.
102. In discussing the union of railway interests under State
authority we will first call attention to the case of a grant of cor-
porate ability to acquire stock in railways beyond the State’s juris-
diction.
The Northern Securities plan gives point to this case. The
Great Northern Railway was chartered by Minnesota; the North-
ern Pacific by Wisconsin, running through Minnesota by license
81
and competing therein with the Great Northern. Minnesota had
forbidden the consolidation of competing roads within her juris-
diction, and had made good the prohibition in a suit involving
these very lines.”
The Northern Securities Company was organized under the
general corporation law of New Jersey and acquired shares of the
Great Northern and Northern Pacific, whose lines are located be-
yond New Jersey territory.
Minnesota complained that if the Company exercised its ap-
parent rights of ownership the Great Northern and Northern
Pacific lines within her territory would be virtually consolidated
in defiance of local law, and asserted that New Jersey did not
intend to, indeed could not authorize the Company to thus contra-
vene the policy of a sister State. The Company pointed out that
New Jersey simply authorized her corporation to acquire prop-
erty, including railway stocks, and asserted that the State had
so absolute a power in the premises as to make her indifferent
to, and irresponsible for unwelcome results in other States.
New Jersey, be it noted, did not support Minnesota's position
by proceeding against the Company for an abuse of charter privi-
leges.
Minnesota brought a suit in her own courts to dissolve what
she alleged to be a virtual consolidation. This was removed to the
Federal Courts, but the Supreme Court disclaimed jurisdiction
and remanded it to the State tribunals,i where no further proceed-
ings were taken because of the successful prosecution of the Fed-
eral Suit.
Questions of great interest are suggested by this controversy,
but they are not sufficiently pertinent to our subject to warrant
discussion here. They do not involve the relation of the United
States to a State, but the relation of one State to another. If pre-
sented to a Federal court no act of Congress will serve as a guide.
The court 1nust apply appropriate principles of interstate law.
103. Our railway system affords notable instances of consoli-
dation, lease or corporate purchase of stock, all authorized by
State law, whereby two or more interstate lines running between
common points are dominated by a single interest. By these
arrangements ability to “restrain trade,” in the sense of abating
competition, is more clearly perceived and more surely accom-
* Pearsall v. Great Northern Ry., 161 U. S., 646.
t Minnesota v, Northern Securities Co., 194 U. S., 48.
Consolidation
lease and
purchase.
82
plished than by the Securities plan, and the relation of the Securi-
ties decision to them gives to this case its chief interest in the rail-
way world.
Now, such arrangements are not relieved from Federal rebuke
merely by proof of State authorization. A State of the Union can
no more restrain interstate commerce than can its citizens. In-
deed, it was the well-grounded apprehension of State interference
that led to the conferring of Federal power over this commerce.
If corporate consolidation, or lease, or purchase of stock distinctly
authorized by State law restrains interstate commerce it is sub-
ject to condemnation by Congress, and is condemned by the Anti-
Trust Act if comprehended in its terms.
I remark here that in the Securities case the majority of the
Court seem to think that the purchase of stocks was not distinctly
authorized by New Jersey, but was an abuse of the powers con-
ferred by the New Jersey statute. It is not clear how far this
opinion contributed to the judgment, but we are by no means
assured that a like judgment would have been rendered had the
purchase been authorized by the States where the railways were
incorporated.
104. In my opinion an imperative rule of construction places
consolidations, leases and purchases beyond the purview of the
Anti-Trust Act. They rest upon State laws declaratory of State
policies. These policies and their results were well known to Con-
gress at the passage of the Act. Conceding a Federal power to
annul them, if, in truth, they restrain interstate commerce, an in-
tention to exert the power must be clearly expressed. Federal
condemnation of State policies, however lawful in a particular
case, is too rare, and too serious an action to be inferred from a
general statute wherein no such intention is patent: So much re-
spect is due to the States.
If the States enacting these laws have really entered the pro-
vince of interstate commerce they have exercised permissive pow-
ers with the silent consent of Congress; and persons who have
invested enormous sums in promoting great enterprises in reliance
upon these laws are at least entitled to an adjudication that the
Anti-Trust Act does not disclose a revocation. For this reason I
do not share the apparent anxiety of Mr. Justice White and his
colleagues in the Securities Case regarding the railway consolida-
tions, etc., authorized by States.
105. Are these consolidations, leases and purchases upon which
83
so large a part of our railway system is founded only protected
from Federal attack by a rule which to-morrow may be rendered
inapplicable by an amendment of the Anti-Trust Act? Does the
commerce power of Congress, the only possible source, extend to
the nullification of State laws authorizing corporations to con-
solidate, to lease or to purchase stock where the result would be
an abatement of interstate railway competition?
In Louisville & Nashville R. v. Kentucky” the Supreme Court
dismissed the argument that a State law forbidding the consolida-
tion of competing railways engaged in interstate commerce in-
vades the province of Congress, saying: “If it be assumed that the
States have no right to forbid the consolidation of competing
lines, because the whole subject is within the control of Congress,
it would necessarily follow that Congress would have the power to
authorize such consolidation in defiance of State legislation—a
proposition which only needs to be stated to demonstrate its un-
soundness.”
In the Northern Securities case the principal opinion and the
minority opinion differ in regard to the effect of this earlier case.
Mr. Justice Harlan said: “If there is anything in that case which
even intimates that a State, or a State corporation may in any way
restrain interstate commerce, over which Congress has, by the Con-
stitution, complete control, we have been unable to find it.” And
again, “even if a State allowed consolidation it would not follow
that the stockholders of two or more State railroad corporations,
having competing lines and engaged in interstate commerce, could
lawfully combine and form a distinct corporation to hold the stock
of the constituent corporations, and, by destroying competition be-
tween them, in violation of the act of Congress, restrain commerce
among the States and with foreign nations.#
Mr. Justice White and his colleagues emphatically maintained
the right of a State to consolidate its lines, and said of the Louis-
ville & Nashville case: “It is to be observed that if the consolida-
tion of State railroad corporations, because they did in part an
interstate commerce business, was within the paramount authority
of Congress, that authority was exclusive and the State regulation
which the Court upheld was void.”f
I cannot follow this comment on the Louisville and Nashville
case, for, as I have endeavored to show, even if consolidation
* 161 U. S., 702. •- - -----
+ 193 U. S., 848,888,
+ 193 U. S., 882,
84
be within the Federal province State action in the premises would
be permissible until Congress should manifest its concern.”
106. Whatever the true Value of the Louisville & Nashville
case, I am of the opinion that where a State authorizes the union
of two or more railways within its jurisdiction by means of con-
solidation, lease or purchase, the transaction is not open to Fed-
eral attack on the ground that it brings under one controlling
interest lines which happen to be routes of interstate commerce
between common points. *
I say “happen” with intention. A State never authorizes an
interstate line, but simply a line which, if running to its boundary
may by the complementary action of the adjacent State form a
link in what is, in fact, an interstate railway.”
The State has full jurisdiction over this link, except where
Federal rights attach in regard to the movement of interstate
traffic. None will contest the State’s exclusive right to deter-
mine who shall control it.
Now, if a State shall authorize another line, which becomes a
link in a second interstate route between points already served by
the first, who will maintain that it is automatically shorn of the
exclusive right to control both links?
When it is understood that each State link of an interstate line
is a piece of property within the jurisdiction of a State, the
State’s right to authorize consolidation, lease or purchase is man-
ifest. For each of these transactions involves the ownership of
property, and the power to legislate in respect of ownership must
reside in the government having jurisdiction over the property.
The principle of this proposition was maintained by the minor-
ity of the Court in the Securities case. The majority did not deny
it, but deemed it inapplicable because they found that so far as the
Anti-Trust Act was concerned, the acquisition of stocks by the
company was not an ordinary purchase of property.
107. So far as private State railway corporations are con-
cerned there are perhaps many citizens who would view with in-
difference, if not approval, a perversion of constitutional law that
would vest in Congress an ultimate power to regulate their owner-
ship. This would entail a contempt of State rights too blatant
to be ignored by the Commonwealths themselves.
In some cases a State has expressly reserved the right to take
* S. 48.
85
over a railroad upon certain terms. In all cases it has been sup-
posed to have the power to expropriate every mile of railroad (not
Federal) within its territory, subject, of course, in either event,
to undiminished Federal control in respect of interstate trans-
portation.
It is inconceivable that Congress could disparage these rights
on the pretence that their exertion would vest in a State the
power to restrain interstate commerce. I say “pretence” advised-
ly. Of all the fallacies that vex the discussion of the interstate
railway question and retard its reasonable solution, none is more
mischievous than the notion that State control over State rail-
ways trenches somehow upon the legal rights of the Federal Gov-
ernment. Upon its claims of power, possibly; upon its rights,
not at all. .
The Federal right of present interest is simply the right to
condemn the imposition of extortionate or discriminating inter-
state rates, and if every State of the Union should take over all
the lines within its territory none could prescribe an interstate
rate. Under no conceivable circumstances would it be possible to
infringe upon Federal power to regulate the charges for transpor-
tation from State to State. With this power intact the United
States have full control of the critical subject of Federal concern
in our interstate railway system.
108. I have reviewed the railway decisions of the Supreme
Court based on the Anti-Trust Act and especially the Northern
Securities case. Like the Insular cases, the Securities case fails
to enrich constitutional jurisprudence owing to the lack of a well-
defined principle to support the decree.
In these several cases the close divisions of the Court, the
obscurities and cross currents of the majority opinions, the per-
sistency of dissent apprise us that no clear and stable principles of
constitutional law back the Court’s orders.
We who fear that the Securities case may tend to encourage an
unwarrantable embarrassment to the conduct of business are not
disquieted because the Supreme Court has forbidden the Securities
Company to vote its stock at Northern Pacific and Great Northern
meetings. The business interests of the country are not embar-
rassed because a holding corporation organized by A, B and C, and
taking their railway stock in exchange for its own shares is for-
bidden to vote the stock.
86
We are disquieted by the spirit of the opinion of Mr. Justice
Harlan and his colleagues, and if excuse for apprehension be
called for it may be found in the opinions of their dissenting
brethren. In closing his separate opinion in the Northern Securi-
ties case Mr. Justice Brewer says: “I have felt constrained to
make these observations for fear that the broad and sweeping lan-
guage of the opinion of the Court might tend to unsettle legitimate
business enterprises, stifle or retard wholesome business activities,
encourage improper disregard of reasonable contracts and invite
unnecessary litigation.”* “I am happy to know ’’ says Mr. Justice
Holmes, “that only a minority of my brethren adopt an interpreta-
tion of the law [the Anti-Trust Act] which in my opinion would
make eternal the bellum omnium contra omnes and disintegrate
Society so far as it could into individual atoms. If that were its
intent I should regard calling such a law a regulation of commerce
as a mere pretense. It would be an attempt to reconstruct
Society. I am not concerned with the wisdom of such an attempt,
but I believe that Congress was not entrusted by the Constitution
with the power to make it and I am deeply persuaded that it has
not tried.”f
109. What is there in the principal opinion in the Securities
case to draw such severe rebuke? Is it not the proposition sug-
gested by the words I have italicized in the following passages?
“Congress * * * has prescribed the rule of free competi-
tion among those engaged in such commerce.”
“The constitutional guarantee of liberty of contract does not
prevent Congress from prescribing the rule of free competition for
those engaged in interstate and international commerce.”
“Whether the free operation of the normal laws of competition
is a wise and wholesome rule for trade and commerce is an
economic question which this Court need not consider or deter-
mine. * * * Be all this as it may, Congress has, in effect,
recognized the rule of free competition by declaring illegal every
combination or conspiracy in restraint of interstate and interna-
tional commerce. As in the judgment of Congress the public con-
venience and the general welfare will be best subserved when the
natural laws of competition are left undisturbed by those engaged
in interstate commerce, and as Congress has embodied that rule
in a statute, that must be, for all, the end of the matter, if this is
to remain a government of laws, and not of men.”
Spirit of the
principal
Opinion.
The rule of
competition.
* 193 U. S., 364.
+ 193 U. S., 411.
87
“The rule of competition, prescribed by Congress, was not at
all new in trade and commerce. And we cannot be in any doubt
as to the reason that moved Congress to the incorporation of that
rule into a statute.”
110. What is called the “law of competition” has been referred
to in judicial opinions in common law cases, and in several cases
arising under the Anti-Trust Act, but, generally, the references
suggest a matter not without interest to jurisprudence, yet not
within the sphere of legislation.
To-day this “law” is treated by judges of the Supreme Court
as a comprehensive rule of action prescribed by Congress and
enforceable by judicial decree. Hence, we are pressed to consider
what it is, and whether, or how far it can be made a legal obliga-
tion.
There is a “natural law of competition.” In scientific phrase
this “law” decrees the “survival of the fittest.” In common speech
the “weakest goes to the wall.”
The law appears to work freely among animals, and with
little check among the lowest races of the human family. But the
movement toward civilization is marked by progressive mitiga-
tions, and that nation is pre-eminent where the weakest are
furthest from the Wall.
The survival of the fittest butchers, bakers and candlestick
makers does not mean less, or poorer meat, bread and candles to
the community, in fact it is quite consistent with a general im.
provement in the service of these articles, though perhaps at some-
what higher prices. But the survival of the fittest railway between
A and B means damage to the community living along the beaten
line. This economic fact was pressed upon the Supreme Court in
the Associations cases,i and while the Court properly declined to
hold the Anti-Trust Act inapplicable to railways because its appli-
cation might beget ill consequences, the fact itself should not be
ignored by our lawmakers. -
Competition in railway rates is exceptional. France tolerates
it to a very limited degree. Germany substantially discourages
it. Great Britain does not compel it.
The United States, alone among the great nations, advertise a
programme of severe railway competition, and the only reason
* 198 U. S., pp. 831, 832, 337, 338.
+ 166 U. S., 321; 171 U. S., 575.
88
why this has not been carried out to the serious injury of the come
munity or abandoned because of injurious results is that up to the
present time competition has been abated largely by methods not
yet pronounced illegal, and in my opinion beyond Federal pro-
hibition.
111. I am Sure Judge Harlan and his colleagues do not mean
to give hopeless recognition to the natural law of competition,
much less to commend it. But, when they recognize it as a con-
stitutional rule for the conduct of interstate commerce, and, by
implication, of commerce in the States as well, they affirm that
throughout the Republic this brutal law may be intensified in the
business world by legislation.
No more than this do they intend. No more than this do they
affirm. Yet in affirming this they inevitably involve the whole
social fabric. For men gain their livelihood by business, and if
the rule of competition be enforced here, nay if it be merely let
alone, it will quickly overrun society. Alarmed by commercial
transactious which they honestly believe to threaten serious evils
to the community these Judges have been swept into assertions
deserving Mr. Justice Holmes's rebuke that they tend to encourage
“the warfare of all against all.”
112. The injection of this “natural law” into the province of
practical jurisprudence would bring confusion.
If jurisprudence were an intellectual diversion, instead of a
system of Conduct, and courts theatres for disputation, instead Of
places for the settlement of controversies “free competition”
would be as nutritious and indestructible a bone of contention
among jurists as it is among economists.
What is “competition”? Does it mean only rivalry between
identical articles of commerce, as anthracite coal from this, and
that mine? Does it cover rivalry between different species of like
things, as anthracite and bituminous coal? Does it extend to
rivalry between different things serving like ends—coal, petro-
leum, electricity as generators of heat and power?
What is free competition? A gentle contest, keeping rival pur-
veyors up to the mark in quality of offerings and down to the mark
in price? A bitter war, exhausting the victors, crushing the van-
quished, impairing offerings, and confounding prices? -
Is “competition” really confined to conflicts between purvey-
ors? Does it not include the perpetual controversy between seller
and buyer? The purveyor must sell or fail, and he cannot sell if
89
his prices deter buyers. Is not the market place the arena of com-
petitive effort?
Is not competition, in a broad sense, irrepressible?
Is there any reason to credit the socialist’s assertion that the
state itself could stop the struggle for existence by undertaking
the functions of production and distribution?
Such questions as these would come into court should Con-
gress pass an “Act prescribing the rule of free competition in com-
merce among the States and with foreign nations.” Do Mr. Jus-
tice Harlan and his colleagues hold that this is a proper alterna-
tive title for the “Act to protect trade and commerce against un-
lawful restraints and monopolies”?
113. While Congress, in condemning “monopoly” and “re-
straint of trade,” is held to have condemned certain acts which
tend to abate competition, it does not inevitably prescribe a rule
of free competition. An order to refrain from doing these acts is
not a general command to fight for trade.
The majority of the Supreme Court is so clearly of this opinion
that we are reassured for the present. But additional legislation,
or even a slight change in the personnel of the Supreme Court,
may reopen the question whether Congress is empowered by the
commerce clause to prescribe the rule of free competition for
interstate business, including, of course, interstate transportation.
Evidently Congress is not competent to compel persons to en-
gage in a business.
Where a single railroad runs between A and E Congress can-
not correct extortionate rates by compelling other capitalists to
build a rival line. Should the Government itself build a line it
would not enforce a rule of competition in any legal sense. It
would merely present a competitor.
Suppose the line in question runs through B and the owners
build a new line from A to E running through C. Traffic between
A and E will remain non-competitive, though the towns are now
actually served by physically separate lines. No one will pretend
that Congress could compel free competition here by forcing the
owners to either sell one of the lines or operate both in antago-
mism. Who would affirm that A and B were prejudiced because
the second line had not stopped at C2 -
I have given these illustrations to show that the mere existence
of non-competitive conditions is not a public wrong within the
Non- .
COmpetitive
Conditions.
90
What is the
legal basis of
anti-trust
legislation?
remedial power of Congress. If, then, a “law of free competition”
is enforceable by Congress it could operate only to prevent the
destructioli of competition when this had once been established.
Where rival railroads run from A to B, and State laws author-
ize the discontinuance of one of them, or its diversion to C, Con-
gress cannot intervene on the ground that a competitive condition
is destroyed because, as we have seen, the location and mainte-
nance of the lines are matters of State concern.”
As it is legally possible, then, for States to deprive A and B of
competitive service by exerting powers of discontinuance or revo-
cation, I do not perceive a Federal right to forbid them to effect a
like result by authorizing consolidation, lease or purchase, unless
it can be demonstrated that, though a State cannot be compelled
to authorize or continue competing lines, it is bound to preserve
rivalry between originally competing lines so long as these are in
Operation.
I am satisfied that the power of the States in respect to the
ownership and control of their railways is too firmly based to
be undermined by such artificial reasoning.
114. When, with the sanction of the Supreme Court, we have
rejected the “natural law of competition” as a constitutional
foundation for Federal statutes of the Anti-Trust Act class, we
must proceed to inquire what is really the legal basis for such
legislation, and we commence with this proposition—Congress is
authorized to prohibit any restraint upon interstate commerce by
whomsoever imposed and howsoever caused.
Transportation is restrained when it is interrupted by physical
obstruction or violence; when reasonable facilities are denied
through parsimony or unjust discrimination; when extortionate
charges are imposed, and this includes unjust discrimination in
rates, which means extortion to the victim.
So far there is substantial agreement.
I think it will be agreed also that Congress is not always
obliged to await the actual imposition of a restraint, but may
authorize injunctive process in face of an evident threat, and has
given this authorization in some degree in the Anti-Trust Act.
The granting of an injunction is a judicial act, and, while
the legislature may enlarge the jurisdiction of the courts by add-
ing statutory opportunities to inherent powers, it cannot empower
* S. 71.
91
judges to enjoin actions which are grounded in constitutional
rights. - -
If a body of railway employees seriously threaten to obstruct
railway traffic as a means of enforcing their demands the state is
not obliged to stand by until the mischief is done: And so also if it
appears that railway managers are about to inflict a substantial
restraint on commerce. But neither employees nor managers
should be enjoined from merely taking steps that would in fact
facilitate an infliction of injury, even though there is reason to sup-
pose they believe such infliction would promote their ends.
The facts in the railway cases decided by the Supreme Court
under the Anti-Trust Act show that in each one the judgment was
based upon apprehension of an injury, rather than on its actual
commission. It did not appear that the rates charged under the
Trans-Missouri, and Joint-Traffic agreements were extortionate,”
Or that rates on the Great Northern and Northern Pacific were
advanced after the Northern Securities Company acquired control.
In these cases the Court was really moved by apprehension.
Apprised of intention and ability to abate competition it perceived
a dangerous threat of extortion.
In the Association cases the arrangements effected uniform
rates, and very likely the Securities plan would have led to this
result. Uniformity, of course, is likely to mean an advance in
certain rates on this or that line. Indeed a general advance in
rates may follow abatement of competition, but a mere advance is
not proof of extortion, and no court mindful of its responsibilities
would so declare.
From whatever standpoint we view these railway cases we
come to this practical result. The defendants had not restrained
interstate commerce by charging extortionate rates. As a matter
of fact in each case a bare majority of the Court condemned rail-
ways for removing certain reciprocal checks on extortion.
115. When we recall that a majority of the Court has just de-
clared that an individual may freely remove such checks by pur-
chasing rival lines,f we perceive that the Supreme Court does not
give effect to my proposition: “Congress is at thorized to pro-
hibit any restraint upon interstate commerce by whomsoever im-
posed, and howsoever caused.”
D is constitutionally entitled to affect commerce by means
which, at this moment, are forbidden to A, B and C acting to-
* 166 U. S., 290; 171 U. S., 505.
+ S. 100,
92
gether: The individual has a constitutional right to accomplish
that which the Supreme Court holds is forbidden to an associa-
tion; and this distinction I believe to be unsound.
Furthermore if an association of another kind—e.g., a State
consolidation of corporations—is also entitled to affect commerce
in a like manner, and I am satisfied that it is, we have an un-
sound distinction between associations of different kinds pursuing
the same ends. -
To my mind these several propositions do not present a con-
sistent principle. I am convinced that I am right in attributing
to Congress equal powers and limitations as to every person en-
gaged in interstate commerce. When D with his huge fortune
can lawfully accomplish a certain result A, B and C cannot con-
sistently be forbidden to effect a like result by combining their
lesser fortunes and influences.
116. The Supreme Court has fallen into inconsistency by put-
ting the question: What methods have been employed here with
regard to commerce?—before answering comprehensively: What
is a restraint of commerce?
Applying this primary question to railway intercourse we find
that commerce is never restrained so long as the line is open to
all comers at reasonable rates. What more can the community
ask? What more should Congress require?
Application of this common sense test of restraint will sweep
many cobwebs out of one of the most important provinces of Fed-
eral jurisprudence. If a given condition produces no real re-
straint, proof that it has been brought about by a combination will
not make it illegal. If there be a real restraint, proof that it has
been made possible by a State authorized purchase, consolidation
or lease of lines will not make it lawful.
We shall understand that, so far as Congress is concerned, indi-
viduals, combinations and corporations may deal with railways at
discretion so long as the lines are open to all comers at reason-
able rates.
More importantly I believe there is sound constitutional war-
rant for Federal intervention only when a real restraint on com-
merce is actually imposed or inevitably threatened.
INTERNATIONAL TRANSPORTATION.
117. While interstate transportation is the principal subject
of this examination, the relation of our railways to foreign rail-
i’
93
ways and to shipping lines requires the special consideration of
Federal power over international traffic.
It is commonly assumed that Federal power to regulate this
traffic is summed up in the clause empowering Congress to “regu-
late commerce with foreign nations, and among the several States,
and with the Indian tribes.” Here is an adequate grant of power
for the regulation of foreign trade, subject only to the express pro-
hibition against taxing exports from the States, but it is not the
only, or the essential constitutional warrant for Federal jurisdic-
tion over this trade.
The subject of international relations was surrendered by the
States to the Federal Government. The completeness of this sur-
render is evidenced by the exclusive Federal powers to make war
and peace, to negotiate treaties, to send and receive ministers and
consuls, and to lay tariffs on imports; and by the prohibition laid
upon the States in the matter of treaties, which are the very basis
of international intercourse.
In view of the text and spirit of these constitutional provisions
it is evident that if the words “with foreign nations” had been
omitted from the commerce clause an equivalent jurisdiction over
international trade must have been implied from the comprehen-
sive power over international intercourse, of which trade is a part.
On the other hand the omission of the words “among the several
States” would have left Congress without equivalent jurisdiction
Over interstate trade.
118. Recognizing the broad foundation of Federal jurisdiction
in international affairs we shall gain a better conception of Fed-
eral power. For example, immigration laws have been called
“regulations of commerce,” but in the recent opinion of the Su-
preme Court affirming the right to deport an anarchist immigrant
under the Alien Immigration Act of 1903, we read: “Whether
rested on the accepted principle of international law that every
sovereign nation has the power, as inherent in sovereignty and
essential to self-preservation, to forbid the entrance of foreigners
within its dominions, or to admit them only in such cases and
upon such conditions as it may see fit to prescribe; or on the
power to regulate commerce with foreign nations, which includes
the entrance of ships, the importation of goods, and the bringing
of persons into the ports of the United States, the act before us is
not open to constitutional objection.”f
* See Head Money Cases, 112 U. S., 591,
+ Turner v. Williams, 194 U. S., 290,
94.
Is not an “accepted principle of international law” a broader.
and therefore a better warrant for immigration acts than a power
to regulate “commerce”? .*
International Railways.
119. We wilſ first consider international railways where the
domestic section of the line lies wholly within Federal, as distin-
guished from State territory, for here Federal jurisdiction is
plainly unaffected by State rights. *.
In this case the reciprocal positions of the United States and
the foreign country resemble those of adjacent States of the Union.
Each is competent to build a line to a common boundary point:
Neither is able to compel connection. Each has exclusive juris-
diction over its own section; none whatever over the other.
In defining the powers of the United States with respect to
interstate and international railway systems radical differences
appear. While Congress cannot compel or hinder the connec-
tion of State roads,” it is competent to authorize independent
interstate lines; but a power to establish international lines is
not vested in either nation alone: Each must cooperate.
Again, as against the States, Congress has authority only
where commerce involves the crossing of a boundary line. As
against a foreign country the authority of Congress stops on the
hither side. Whether, and where the line shall be crossed, and
under what regulations, are questions which, in case of disagree-
ment, must be adjusted by treaty.
We are dealing now with independent sovereigns, not with fra-
ternal States owing a common allegiance, and while this implies
a lack of Federal legislative power beyond the limits of the Re-
public, it suggests a great power within them.
120. The great power of the United States over international
intercourse includes the right to forbid or disconnect a railway
from Federal to foreign territory, if only in the interests of mili-
tary defense.
Military considerations played a great part in the construction
of European railroads. Weaker States were naturally reluctant
to facilitate possible lines of invasion. But, since lack of railway
communication would have been intolerable from a commercial
standpoint, they lessened the opportunity for easy invasion by
* S. S. 40–43,
+ S. 88.
95.
adopting a gauge useless for foreign rolling stock. Commercial
interests, however, hampered by transhipment of freight at fron-
tiers, finally secured an international gauge on important lines.
Considerations of national defense have not yet affected our
attitude toward international railways, and are not likely to be-
cause of our military supremacy over our neighbors. I have men-
tioned them chiefly to emphasize the breadth of Federal power over
railway communication between a foreign country and Federal
territory.
This power is undiminished where, as in most cases, the domes-
tic links of our international lines are located in State territory.
As a matter of fact most, if not all, of these lines have been con-
nected by State and foreign co-operation, without any action by
Congress. In point of law, however, the connections must be
deemed to have been made with the assent of Congress, for the
supreme reason that a State has no power to maintain intercourse
with a foreign nation against the will of the United States: And,
by the same token, a connection may be forbidden or broken by
Federal power. -
s Rail and Water Transportation.
121. The breadth of Federal power over international com.
merce is more readily perceived over sea than over land because
it affects domestic waters subject to Federal jurisdiction in the
interest of navigation, and the high seas where a State of the
Union has no jurisdiction whatever.
Over American ships the power is absolute: These are float-
ing sections of national territory. Over alien ships it is influen-
tial: Their access to our ports may be barred, and is always con-
ditioned upon conformity to our laws.
For the purposes of this examination it will be sufficient to
consider water-borne commerce in respect of transportation
charges only; first by themselves, and then in relation to railway
charges.
Comparing ship service with railway service it appears that
while a “general ship carrying goods for hire” is a common carrier
in respect of responsibility for loss of goods,” it is not, like a rail-
way, necessarily a common carrier to the extent of being obliged
to serve all comers at reasonable rates.
* Liverpool Steam Co. v. Phoenix Ins. Co., 129 U. S., 437.
96
These obligations are assumed, however, when a public service
is advertised and established between given points. It seems,
however, that in the absence of a subsidy contract the mainte-
nance of service is discretionary, differing in this respect from a
railway, which requires public franchises, notably the eminent do-
main, and receives them upon the condition of rendering public
service.
122. Assuming that international shipping lines are affected
with a duty to charge undiscriminating and reasonable rates we
proceed to inquire whether Congress has concerned itself with the
performance thereof. The Interstate Commerce and Anti-Trust
Acts present the only possible evidences of Federal concern.
The Interstate Commerce Act applies “to any common carrier
or carriers engaged in the transportation of property “ ” *
partly by railroad and partly by water when both are used, under
a common control, management, or arrangement, for a continuous
carriage or shipment from any place in the United States to an
adjacent foreign country, or from any place in the United States
through a foreign country to any other place in the United States
* * * and also to the transportation in like manner of prop-
erty shipped from any place in the United States to a foreign coun-
try and carried from such place to a port of transshipment, or
shipped from a foreign country to any place in the United States
and carried to such place from a port of entry either in the United
States or an adjacent foreign country.”
Of this, the first section of the Act the Supreme Court says: “It
would be difficult to use language more unmistakably signifying
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 “trans-
portation’ shall include all instrumentalities of shipment or carri-
age. Having thus included in its scope the entire commerce of the
United States, foreign and interstate * * *” etc.”
A cursory reading of this passage might convey the idea that
the Act embraces all international commerce by water, but the
words I have italicized in the first section seem to limit the juris-
diction to carriage from ports of entry and to ports of shipment.
Certainly these limits have been observed. The Commission
has not attempted to pass upon international water rates, either
* Texas & Pacific R. v. Interstate Commerce Commission, 162 U. S., 212,
97
in themselves, or as they enter into through rates between foreign
countries and interior domestic points.
123. The Anti-Trust Act embraces foreign as well as interstate
commerce, and all persons within the jurisdiction of the United
States are forbidden to restrain this commerce by unlawful com-
bination or monopoly. -
While an illegal restraint of sea-borne trade is not physically
impossible and has in fact been alleged in common law actions,”
the Federal Government has not yet found a case calling for the
enforcement of this Act. - ---
Sea-borne foreign trade is not “restrained” even in the arti-
ficial sense of the Anti-Trust Act, and efficient competition is SO
likely to prevail against any attempt to abate it that we need not
anticipate an extension of the Commerce Act, or a prosecution
under the Anti-Trust Act.
124. While the rates of ocean carriers are not supervised by
Congress, and those of foreign railways are beyond its jurisdic-
tion, rates of each sort are not without influence upon the inter-
national service of our domestic railways, especially upon the Ser-
vice rendered to sea-borne commerce in carrying goods acroSS
country for a further voyage, distributing imports and forwarding
exports.
- International transit rates are of no concern to our local ship-
pers as the traffic does not affect their markets, but some of our
railways complain that in competing with the Canadian transcon-
tinental line for freight in transit to the Far East via Atlantic
ports they are placed at a disadvantage by the obligation to main-
tain published rates, say from Boston to Seattle, for a fixed period
whereby the Canadian line, free from this obligation, is enabled to
attract business by offering a lower rate to Vancouver.
125. In the other cases the shippers have complained that a
railway corporation seeking freight by offering an attractive
through rate from a foreign port to a domestic place and
vice versa, sometimes charges a lower rate for the land haul than
is imposed for domestic goods of like class over the same route.
In an import case of this kind the Interstate Commerce
Commission declared this practice forbidden by the long and short
haul clause of the Act, but were overruled by the Supreme Court,
who decided that the different rates were imposed under sub-
stantially different conditions.#
* Mogul Steamship Case, 1892, A. C. 25.
t Texas & Pacific R. v. Int, Com, Comm., 162 U. S., 197,
98
It was argued in this case that the Interstate Commerce Act.
should be interpreted in connection with protective tariff legisla-
tion. In some countries railway rates are adjusted to tariff poli-
cies, but whether this would be lawful and expedient here I do not
discuss. Suffice to say the Supreme Court holds that the Inter-
State Commerce Commission is not authorized “to so construe the
Act to regulate commerce as to make it practically co-operate with
what is assumed to be the policy of the tariff laws. * * * Our
reading of the Act does not disclose any purpose or intention on
the part of Congress to thereby reinforce the provisions of the
tariff law. These laws differ wholly in their objects from the
law to regulate commerce. Their main purpose is to collect
revenues with which to meet the expenditure of the Government,
and those of their provisions whereby Congress seeks to so adjust
rates as to protect American manufacturers and producers from
competition by foreign low-priced labor, operate equally in all
parts of the country.
The effort of the Commission, by a rigid general order to de-
prive the inland consumer of the advantage of through rates, and
to thus give an advantage to the traders and manufacturers of the
large seaboard cities, seems to create the very mischief which it
was one of the objects of the Act to remedy.”
Under the decision in the Texas and Pacific Railway case our
railways are enabled to compete with land and water lines the
world over unembarrassed by the complaints of discrimination
preferred by local shippers.
* Texas & Pacific R. v. Interstate Commerce Commission, 162 U. S., 221.
99.
I conclude this examination of Federal power in respect of
railways with a brief review and opinion touching several mat-
ters of special importance.
In that part of our interstate railway system based upon Fed-
eral charters Congress has evidently a larger interest than in
lines authorized by States. How much larger is yet undeterm-
ined; and it may appear that where State control over territory
has succeeded Federal control there is a modification of Federal
jurisdiction in some directions. Mainly, the system is of State
origin, and recognition of Federal right to authorize new inter-
state lines or expropriate existing ones does not aid in defining
Federal power in respect of the latter while their present status
is maintained.
It is well settled that the authorization, construction and local
operation of these lines are exclusively of State concern, but it is
suggested that the welding of State railways into lines of inter-
state communication is a matter which Congress can regulate if
it chooses,
In my opinion this suggestion is ill founded. While Congress
has jurisdiction over connections with foreign railways, I am
convinced that whether States lines shall, or shall not connect is
a question as completely within the jurisdiction of the States in-
terested as is the interrelation of their common highways. High-
way, turnpike, bridge, ferry and railway are fundamentally alike
in affording public means of communication. They differ only
in manner of use, and as transit is free or subject to reasonable
tolls.
The principle of the suggestion necessarily implies that all in-
terstate commerce, including personal, as well as business inter-
course is a Federal privilege. This principle is insinuated in the
theory of Federal concern in interstate railway connections: It is
avowed in the assertion that Congress can forbid the interstate
transportation of articles produced by “trusts.”
The report of the Commissioner of Corporations, just received,
is too elaborate a document to be considered summarily. Indeed
its details do not directly concern railways, which are excepted
from the Bureau’s jurisdiction. The keynote, however, is of inter-
est in any examination of interstate commerce questions.
The Commissioner recommends: “The granting of a Federal
franchise or license to engage in interstate commerce. The imposi-
tion of all necessary requirements as to corporate organization
100
and management as a condition precedent to the grant of such
franchise or license. * * * The prohibition of all corporations
and corporate agencies from engaging in interstate and foreign
commerce without such Federal license” (p. 47) and he says, “As
a matter of law it is of course possible to apply this franchise sys-
tem to individuals; but the purpose of such a system is to remedy
corporate evils, and present conditions do not call for any such
regulation of ordinary individual interstate trade” (p. 58). Here
is the latest statement of the dogma of obstructive power thinly
veiled under the guise of Federal privilege.
If Federal powers were substantiated by cocksure statements
of Federal officials the tone of this report would silence objection,
but we have a better way of interpreting the Constitution, and as
yet no one has had the temerity to request the sanction of the Su-
preme Court for the dogma, though the confiscation clause of the
Anti Trust Act was recorded nearly fifteen years ago.
Excepting the long recognized Federal right to prevent the
passage of infected persons and things, and the right to suppress
immoral traffic lately upheld in the Lottery Case, there is, in my
opinion, no warrant for obstructing interstate commerce in time
of peace. I am sure the unconstitutionality of a statute restrain-
ing personal intercourse would be instantly perceived: If a national
conflict between “open shop” and “closed shop” should result in
a decisive triumph for either party, who believes that the victor
could obtain a valid act of Congress forbidding the vanquished to
move from State to State in search of employment?
The suggestion of a Federal license for interstate trade and
transportation, if less offensive to the spirit of personal liberty,
is quite as repugnant to the principle of free commerce among the
States: And it gains no legal weight because it is aimed at great
corporations and business associations. Congress has no concern
with the creation of a corporation by a State, and while this arti-
ficial person differs from an ordinary citizen in having no right to
do business in another State without that State's assent, its opera-
tions among the States are not constitutionally subject to a stricter
Federal regulation than are the operations of individuals. And
the same is true of an association of persons.
The corporation and the association may wield far greater
power than an individual is likely to obtain, and because of their
larger capacity for mischief may be fairly singled out for special
control, but Congress has no power over any of these unless they
engage in interstate commerce and equal power over all when
they engage in it.
!
*
101
I am of the opinion that intercourse among the States is not
a Federal privilege. Where it involves the activities of natural
persons it is a common right. Where it involves the activities of
corporations it depends largely upon State permission. Where
it involves public ways of communication the States are fully com-
petent to establish them and determine their ownership: For this
reason the physical connection of State railways is within State
jurisdiction; and arrangements looking to their corporate or ad-
ministrative unification through contract, consolidation, lease or
purchase duly authorized by State laws are also of State concern,
and are not within the purview of the Anti-Trust Act even when
they effect an abatement of competition.
Passing from Federal incapacities to Federal powers, and
noting an ample power to protect interstate commerce from State
restraint, and substantial rights of regulation and inquisition in
all that directly involves the movement of persons and property
from State to State, we come to the question of interstate trans-
portation rates. This question is now acute owing to the Presi-
dent’s recommendation of rate-making legislation.
The companies are bound to afford transportation at reason-
able rates: Congress is empowered to provide a method of rate
making: The reasonableness of a rate is a judicial question.
These broad legal propositions are established, and while I have
pointed out some of the difficulties in framing a Federal rate-mak-
ing law at Once valid, just and useful it cannot be said that such a
law is unattainable.
Whether railway interests should oppose public rate-making
in any form, or should co-operate in promoting a conservative
method is a question upon which my opinion is not desired. I
may remark, however, that the suggestion that the companies
should welcome any bill reported to the present Congress lest they
be punished hereafter for contumacy by a more drastic measure
argues petulant dealing with a problem meriting sober and patient
consideration.
The administrators of our railways are justified in asserting
that the railway service and interests are entitled to well con-
sidered legislation, and the framing of a fair rate-making law
will be one of the most arduous tasks that has ever confronted
Congress.
CARMAN F. RANDOLPH.
52 William Street, New York.
Jan. 11, 1905.
N1959.
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