THE REVOLUTION IN POLITICS AND LAW
The economic revolution that followed the War, the swift and potent
upswing of capitalism, and the shifting of political power from the
South to the North made their impress upon every branch of the Federal
Government. Senators of the old school, Clay, Webster, Calhoun, Roger
Baldwin, John P. Hale, James Mason, and Jefferson Davis were succeeded
by the apostles of the new order: Roscoe Conkling and Thomas Platt,
James Donald Cameron, Leland Stanford, George Hearst, Arthur P. Gorman,
William D. Washburn, John R. McPherson, Henry B. Payne, Matthew S. Quay,
Philetus Sawyer, John H. Mitchell, and James G. Blaine. The new Senate
was composed of men of affairs--practical men, who organized gigantic
enterprises, secured possession of natural resources and franchises,
collected and applied capital on a large scale to new business
undertakings, built railways, established cities with the advancing line
of the western frontier--or represented such men as counsel in the
courts of law.
Not many of them were great orators or widely known as profound students
of politics in its historical and comparative aspects. A few, like
Blaine, Hoar, and Conkling, studied the classic oratory of the older
generation and sought to apply to the controverted issues of the hour
that studious, orderly, and sustained eloquence which had adorned the
debates of earlier years; but the major portion cultivated only the arts
of management and negotiation. Few of them seem to have given any
thought to the lessons to be learned from European politics. On the
contrary, they apparently joined with the multitude in the assumption
that we had everything to teach Europe and nothing to learn. Bismarck
was to them, if we may judge from their spoken words, simply a great
politician and the hero of a war; the writings of German economists,
Wagner and Schmoller, appear never to have penetrated their studies.
That they foresaw in the seventies and eighties the turn that politics
was destined to take is nowhere evident. They commanded respect and
admiration for their practical achievements; but it is questionable
whether the names of more than two or three will be known a century
hence, save to the antiquarian.
Of this group, Roscoe Conkling was undoubtedly typical, just as Marcus
A. Hanna represented the dominant politicians of a later time. He was an
able lawyer and an orator of some quality, but of no permanent fame. He
took his seat in the Senate in 1867 and according to his biographer
"during the remainder of his life his legal practice was chiefly
connected with corporations that were litigants in the district and
circuit courts of the United States,"[13]--the judges of which courts he
was, as Senator, instrumental in appointing. His practice was lucrative
for his day, amounting to some $50,000 a year.[14] He counted among his
clients the first great capitalists of the country. When he was forced
to retire from New York politics, "the first person who came to see him
on business was Mr. Jay Gould, who waited upon him early one morning at
his hotel."[15] He was counsel for Mr. Collis P. Huntington in his
contest against the state legislation which railway interests deemed
unjust and unconstitutional.[16] He was among the keen group of legal
thinkers who invoked and extended the principle of the Fourteenth
Amendment to cover all the varieties of legislation affecting corporate
interests adversely.[17]
Criticism of the Republican party, and particularly of the policies for
which he stood, Mr. Conkling regarded as little short of treason. For
example, when Mr. George William Curtis, in the New York state
convention of 1877, sought to endorse the administration of President
Hayes, whose independence in office had been troublesome to Mr.
Conkling, the latter returned in a passionate attack on the whole party
of opposition: "Who are these men who in newspapers and elsewhere are
'cracking their whips' over Republicans and playing schoolmaster to the
Republican party and its conscience and convictions. They are of various
sorts and conditions. Some of them are the man-milliners, the dilettanti
and carpet knights of politics, men whose efforts have been expended in
denouncing and ridiculing and accusing honest men.... Some of these
worthies masquerade as reformers and their vocation and ministry is to
lament the sins of other people. Their stock in trade is rancid, canting
self-righteousness. They are wolves in sheep's clothing. Their real
object is office and plunder. When Dr. Johnson defined patriotism as the
last refuge of a scoundrel, he was then unconscious of the then
undeveloped capabilities of the word 'reform.'"[18]
The political philosophy of this notable group of political leaders was
that of their contemporaries in England, the Cobden-Bright school. They
believed in the widest possible extension of the principle of private
property, and the narrowest possible restriction of state interference,
except to aid private property to increase its gains. They held that all
of the natural resources of the country should be transferred to private
hands as speedily as possible, at a nominal charge, or no charge at all,
and developed with dashing rapidity. They also believed that the great
intangible social property created by community life, such as franchises
for street railways, gas, and electricity, should be transformed into
private property. They supplemented their philosophy of property by a
philosophy of law and politics, which looked upon state interference,
except to preserve order, and aid railways and manufacturers in their
enterprises, as an intrinsic evil to be resisted at every point, and
they developed a system of jurisprudence which, as Senators having the
confirming power in appointments and as counsel for corporations before
the courts of the United States, they succeeded in transforming into
judicial decisions. Some of them were doubtless corrupt, as was
constantly charged, but the real explanation of their resistance to
government intervention is to be found in their philosophy, which,
although consonant with their private interests, they identified with
public good.
_Writing Laissez Faire into the Constitution_
Inasmuch as the attacks on private rights in property, franchises, and
corporate privileges came principally from the state legislatures, it
was necessary to find some way to subject them to legal control--some
juristic process for translating _laissez faire_ into a real restraining
force. These leading statesmen and lawyers were not long in finding the
way. The Federal courts were obviously the proper instrumentalities, and
the broad restrictions laid upon the states by the Fourteenth Amendment
no less obviously afforded the constitutional foundation for the science
of legislative nihilism. "No state," ran the significant words of that
Amendment, "shall make or enforce any law which shall abridge the
privileges or immunities of citizens of the United States; nor shall any
state deprive any person of life, liberty, or property without due
process of law; nor deny to any person within its jurisdiction the equal
protection of the laws."
What unseen implications lay within these phrases the most penetrating
thinkers divined at once. Protest was made by the New Jersey legislature
against the Fourteenth Amendment in 1866 on the ground that it would
destroy all the essential rights of a state to control its internal
affairs; and such opinion was widespread. But the most common view was
to the effect that the Amendment would be used principally to surround
the newly emancipated slaves with safeguards against their former
masters who might be tempted to restore serfdom under apprentice and
penal laws and other legal guises. Still there is plenty of evidence to
show that those who framed the Fourteenth Amendment and pushed it
through Congress had in mind a far wider purpose--that of providing a
general restraining clause for state legislatures.
The problem of how best to check the assaults of state legislatures on
vested rights was not new when the Fourteenth Amendment was adopted. On
the contrary, it was one of the first concerns of the Convention of 1787
which drafted the original Constitution of the United States, and it was
thought by the framers that security had been attained by forbidding
states to emit bills of credit and make laws impairing the obligation of
contract. Under Chief Justice Marshall, these clauses were so generously
interpreted as to repel almost any attack which a state legislature
might make on acquired rights. However, in the closing years of
Marshall's service, the Supreme Court, then passing into the hands of
states' rights justices, rendered an opinion in the case of Ogden _v._
Saunders, which clearly held that the contract clause did not prevent
the legislature from stipulating that _future_ contracts might be
practically at its mercy. When a legislature provides by general law
that all charters of corporations are subject to repeal and alteration,
such provision becomes a part of all new contracts. Marshall delivered
in this case a vigorous and cogent dissenting opinion in which he
pointed out that the decision had in effect destroyed the virtue of the
obligation of contract clause.
The case of Ogden _v._ Saunders was decided in 1827. Between that year
and the Civil War the beginnings of corporate enterprise were securely
laid in the United States; and the legislatures of the several states
began the regulation of corporations from one motive or another,
sometimes for the purpose of blackmailing them and sometimes for the
laudable purpose of protecting public interests. At all events, large
propertied concerns began to feel that they could not have a free hand
in developing their enterprises or enjoy any genuine security unless the
legislatures of the states were, by some constitutional provision,
brought again under strict Federal judicial control.
The opportunity to secure this judicial control was afforded during the
Civil War when the radical Republicans were demanding Federal protection
for the newly emancipated slaves of the South. The drastic legislation
relative to negroes adopted by the southern states at the close of the
War showed that even in spite of the Thirteenth Amendment a substantial
bondage could be reestablished under the color of criminal, apprentice,
and vagrant legislation. The friends of the negroes, therefore,
determined to put the substantial rights of life, liberty, and property
beyond the interference of state legislatures forever, and secure to all
persons the equal protection of the law.
Accordingly, the Fourteenth Amendment was adopted, enunciating the
broad legal and political doctrine that no state "shall abridge the
privileges or immunity of citizens of the United States; nor shall any
state deprive any _person_ of life, liberty, or property without due
process of law; nor deny to any _person_ within its jurisdiction the
equal protection of the law."
Here was a restriction laid upon state legislatures which might be
substantially limitless in its application, in the hands of a judiciary
wishing to place the broadest possible interpretation upon it. What are
privileges and immunities? What are life, liberty, and property? What is
due process of law? What is the equal protection of the law? Does the
term "person" include not only natural persons but also artificial
persons, namely, corporations? That the reconstruction committee of
Congress which framed the instrument intended to include within the
scope of this generous provision not only the negro struggling upward
from bondage, but also corporations and business interests struggling
for emancipation from legislative interference, has been often asserted.
In arguing before the Supreme Court in the San Matteo County case, on
December 19, 1882, Mr. Roscoe Conkling, who had been a member of the
committee which drafted the Fourteenth Amendment, unfolded for the first
time the deep purpose of the committee, and showed from the journal of
that committee that it was not their intention to confine the amendment
merely to the protection of the colored race. In the course of his
argument, Mr. Conkling remarked, "At the time the Fourteenth Amendment
was ratified, as the records of the two Houses will show, individuals
and joint-stock companies were appealing for congressional and
administrative protection against invidious and discriminating state and
local taxes. One instance was that of an express company, whose stock
was owned largely by citizens of the State of New York, who came with
petitions and bills seeking Acts of Congress to aid them in resisting
what they deemed oppressive taxation in two states, and oppressive and
ruinous rules of damages applied under state laws. That complaints of
oppression in respect of property and other rights, made by citizens of
Northern States who took up residence in the South, were rife, in and
out of Congress, none of us can forget; that complaints of oppression in
various forms, of white men in the South,--of 'Union men,'--were heard
on every side, I need not remind the Court. The war and its results, the
condition of the freedmen, and the manifest duty owed to them, no doubt
brought on the occasion for constitutional amendment; but when the
occasion came and men set themselves to the task, the accumulated evils
falling within the purview of the work were the surrounding
circumstances, in the light of which they strove to increase and
strengthen the safeguards of the Constitution and laws."[19]
In spite of important testimony to the effect that those who drafted the
Fourteenth Amendment really intended "to nationalize liberty," that is
_laissez faire_, against state legislatures, the Supreme Court at first
refused to accept this broad interpretation, and it was not until after
several of the judges of the old states' rights school had been replaced
by judges of the new school that the claims of Mr. Conkling's group as
to the Fourteenth Amendment were embodied in copious judicial decisions.
_The Slaughter-House Cases_
The first judicial interpretation of the significant phrases of the
Fourteenth Amendment which were afterward to be the basis of judicial
control over state economic legislation of every kind was made by the
Supreme Court in the Slaughter-House cases in 1873--five years after
that Amendment had been formally ratified. These particular cases, it is
interesting to note, like practically all other important cases arising
under the Fourteenth Amendment, had no relation whatever to the newly
emancipated slaves; but, on the contrary, dealt with the regulation of
business enterprises.
In 1869, the legislature of Louisiana passed an act designed to protect
the health of the people of New Orleans and certain other parishes. This
act created a corporation for the purpose of slaughtering animals within
that city, forbade the establishment of any other slaughterhouses or
abattoirs within the municipality, and conferred the sole and exclusive
privilege of conducting the live-stock landing and slaughterhouse
business, under the limitations of the act, upon the company thus
created. The company, however, was required by the law to permit any
persons who wished to do so to slaughter in its houses and to make full
provision for all such slaughtering at a reasonable compensation. This
drastic measure, the report of the case states, was denounced "not only
as creating a monopoly and conferring odious and exclusive privileges
upon a small number of persons at the expense of the great body of the
community of New Orleans, but ... it deprives a large and meritorious
class of citizens--the whole of the butchers of the city--of the right
to exercise their trade, the business to which they have been trained
and on which they depend for the support of themselves and their
families."
The opinion of the court was rendered by Mr. Justice Miller. The Justice
opened by making a few remarks upon the "police power," in the course of
which he said that the regulation of slaughtering fell within the
borders of that mysterious domain and without doubt constituted one of
the powers enjoyed by all states previous to the adoption of the Civil
War amendments. After commenting upon the great responsibility devolved
upon the Court in construing the Thirteenth and Fourteenth amendments
and remarking on the careful deliberation with which the judges had
arrived at their conclusions, Justice Miller then turned to an
examination of the historical purpose which underlay the adoption of the
amendments in question. After his recapitulation of recent events, he
concluded: "On the most casual examination of the language of these
amendments, no one can fail to be impressed with the one pervading
purpose found in them all, lying at the foundation of each, and without
which none of them would have been even suggested; we mean the freedom
of the slave race, the security and firm establishment of that freedom,
and the protection of the newly-made freeman and citizen from the
oppression of those who had formerly exercised unlimited dominion over
him. It is true that only the Fifteenth Amendment, in terms, mentions
the negro by speaking of his color and his slavery. But it is just as
true that each of the other articles was addressed to the grievances of
that race and designed to remedy them as the Fifteenth. We do not say
that no one else but the negro can share in this protection. Both the
language and spirit of these articles are to have their fair and just
weight in any question of construction.... What we do wish to say and
what we wish to be understood as saying is, that in any fair and just
construction of any section or phrase of these amendments, it is
necessary to look to the purpose, which as we have said was the
pervading spirit of them all, the evil which they were designed to
remedy, and the process of continued addition to the Constitution until
that purpose was supposed to be accomplished as far as constitutional
law can accomplish it."
Justice Miller dismissed with a tone of impatience the idea of the
counsel for the plaintiffs in error that the Louisiana statute in
question imposed an "involuntary servitude" forbidden by the Thirteenth
Amendment. "To withdraw the mind," he said, "from the contemplation of
this grand yet simple declaration of the personal freedom of all the
human race within the jurisdiction of this government--a declaration
designed to establish the freedom of four million slaves--and with a
microscopic search endeavor to find it in reference to servitudes which
may have been attached to property in certain localities, requires an
effort, to say the least of it."
In Justice Miller's long opinion there is no hint of that larger and
more comprehensive purpose entertained by the framers of the Fourteenth
Amendment which was asserted by Mr. Conkling a few years later in his
argument before the Supreme Court. If he was aware that the framers had
in mind not only the protection of the freedmen in their newly won
rights, but also the defense of corporations and business enterprises
generally against state legislation, he gave no indication of the fact.
There is nowhere in his opinion any sign that he saw the broad economic
implications of the Amendment which he was expounding for the first time
in the name of the Court. On the contrary, his language and the opinion
reached in the case show that the judges were either not cognizant of
the new economic and political duty placed upon them, or, in memory of
the states' rights traditions which they had entertained, were unwilling
to apply the Thirteenth and Fourteenth amendments in such a manner as
narrowly to restrict the legislative power of a commonwealth.
In taking up that clause of the Fourteenth Amendment which provides that
no state shall make or enforce any law abridging the privileges or
immunities of citizens of the United States, Justice Miller declared
that it was not the purpose of that provision to transfer the security
and protection of all fundamental civil rights from the state
government to the Federal Government. A citizen of the United States as
such, he said, has certain privileges and immunities, and _it was these
and these only_ which the Fourteenth Amendment contemplated. He
enumerated some of them: the right of the citizen to come to the seat of
government, to assert any claim he may have upon that government, to
transact any business he may have with it, to seek its protection, share
its offices, engage in administering its functions, to have free access
to its seaports, subtreasuries, land offices, and courts of justice, to
use the navigable waters of the United States, to assemble peaceably
with his fellow citizens and petition for redress of grievances, and to
enjoy the privileges of the writ of habeas corpus. It was rights of this
character, the learned justice argued, and not all the fundamental
rights of person and property which had been acquired in the evolution
of Anglo-Saxon jurisprudence, that were placed by the Fourteenth
Amendment under the protection of the Federal Government.
Within this view, all the ordinary civil rights enjoyed by citizens were
still within the control of the organs of the state government and not
within Federal protection at all. If the privileges and immunities,
brought within the protection of the Federal Government by the
Fourteenth Amendment, were intended to embrace the whole domain of
personal and property rights, then, contended the justice, the Supreme
Court would be constituted "a perpetual censor upon all legislation of
the states, on the civil rights of their own citizens, with authority to
nullify such as it did not approve as consistent with those rights as
they existed at the time of the adoption of this Amendment.... We are
convinced that no such results were intended by the Congress which
proposed these amendments nor by the legislatures which ratified them."
In two short paragraphs, Justice Miller disposed of the contention of
the plaintiffs in error to the effect that the Louisiana statute
deprived the plaintiffs of their property without due process of law. He
remarked that inasmuch as the phraseology of this clause was also to be
found in the Fifth Amendment and in some form in the constitutions of
nearly all of the states, it had received satisfactory judicial
interpretation; "and it is sufficient to say," he concluded on this
point, "that under no construction of that provision that we have ever
seen or any that we deem admissible, can the restraint imposed by the
state of Louisiana upon the exercise of their trade by the butchers of
New Orleans be held to be a deprivation of private property within the
meaning of that provision."
Coming now to that clause requiring every state to give all persons
within its jurisdiction equal protection of the laws, Justice Miller
indulged in the false prophecy: "We doubt very much whether any action
of a state not directed by way of discrimination against the negroes as
a class or on account of their race will ever be held to come within the
purview of this provision." An emergency might arise, he admitted, but
he found no such a one in the case before him.
Concluding his opinion, he expressed the view that the American Federal
system had come out of the Civil War with its main features unchanged,
and that it was the duty of the Supreme Court then as always to hold
with a steady and an even hand the balance between state and Federal
power. "Under the pressure of all the excited feeling growing out of the
War," he remarked, "our statesmen have still believed that the existence
of the states with powers for domestic and local government, including
the regulation of civil rights--the rights of person and property--was
essential to the perfect working of our complex form of government,
though they have thought proper to impose additional limitations upon
the states and to confer additional power on that of the nation."
Under this strict interpretation of the Thirteenth and Fourteenth
amendments, all the fundamental rights of persons and property remained
subject to the state governments substantially in the same way as before
the Civil War. The Supreme Court thus could not become the final arbiter
and control the social and economic legislation of states at every
point. Those champions of the amendments who looked to them to establish
Federal judicial supremacy for the defense of corporations and business
enterprises everywhere throughout the American empire were sadly
disappointed.
Nowhere was that disappointment more effectively and more cogently
stated than in the opinions of the judges who dissented from the
doctrines announced by the majority of the court. Chief Justice Chase
and Justices Field, Bradley, and Swayne refused to accept the
interpretation and the conclusions reached by the majority, and the last
three judges wrote separate opinions of their own expressing their
grounds for dissenting. The first of these, Justice Field, contended
that the Louisiana statute in question could not legitimately come under
the police power and was in violation of the Fourteenth Amendment,
inasmuch as it denied to citizens of the United States the fundamental
rights which belonged to citizens of all free governments--protection
against monopolies and equality of rights in the pursuit of the ordinary
avocations of life. In his opinion, the privileges and immunities put
under the supervision of the Federal Government by the Fourteenth
Amendment comprised generally "protection by the government, the
enjoyment of life and liberty, with the right to acquire and possess
property of every kind, and to pursue and obtain happiness and safety,
subject, nevertheless, to such restraint as the government may justly
prescribe for the general good of the whole." In other words, Justice
Field would have carried the Amendment beyond the specific enumeration
of any definitely ascertained legal rights into the field of moral law,
which, in final analysis, would have meant the subjection of the state
legislation solely to the discretion of the judicial conscience. The
future, as we shall see, was with Justice Field.
In the opinion of Justice Bradley, the Louisiana statute not only
deprived persons of the equal protection of the laws, but also of
liberty and property--the right of choosing, in the adoption of lawful
employments, being a portion of their liberty, and their occupation
being their property. In the opinion of Mr. Justice Swayne, who
dissented also, the word liberty as used in the Fourteenth Amendment
embodied freedom from all restraints except such as were "justly"
imposed by law. In his view, property included everything that had an
exchange value, including labor, and the right to make property
available was next in importance to the rights of life and liberty.
_The Granger Cases_
Three years after the decision in the Slaughter-House cases, the Supreme
Court again refused to interpret the Fourteenth Amendment so broadly as
to hold unconstitutional a state statute regulating business
undertakings. This case, Munn _v._ Illinois, decided in 1876, involved
the validity of a statute passed under the constitution of that state,
which declared all elevators where grain was stored to be public
warehouses and subjected them to strict regulation, including the
establishment of fixed maximum charges. It was contended by the
plaintiffs in error, Munn and Scott, that the statute violated the
Fourteenth Amendment in two respects: (1) that the business attempted to
be regulated was not a public calling and was, therefore, totally
outside of the regulatory or police power of the state; and (2) that
even if the business was conceded to be public in character, and
therefore by the rule of the common law was permitted to exact only
"reasonable" charges for its services, nevertheless the determination of
what was reasonable belonged to the judicial branch of the government
and could not be made by the legislature without violating the principle
of "due process."
Both of these contentions were rejected by the Court, and the
constitutionality of the Illinois statute was upheld. The opinion of the
Court was written by Chief Justice Waite, who undertook an elaborate
examination of the "due process" clause of the Fourteenth Amendment. The
principle of this Amendment, he said, though new in the Constitution of
the United States, is as old as civilized government itself; it is found
in Magna Carta in substance if not in form, in nearly all of the state
constitutions, and in the Fifth Amendment to the Federal Constitution.
In order to ascertain, therefore, what power legislatures enjoyed under
the new amendment, it was only necessary to inquire into the limitations
which had been historically imposed under the due process clause in
England and the United States; and after an examination of some cases in
point the Chief Justice came to the conclusion that "down to the time of
the adoption of the Fourteenth Amendment it was not supposed that
statutes regulating the use or even the price of the use of private
property necessarily deprived an owner of his property without due
process of law." When private property "is affected with public
interest" and is used in a manner to make it of public consequence, the
public is in fact granted an interest in that use, and the owner of the
property in question "must submit to be controlled by the public for the
common good, to the extent of the interest he has thus created."
But it was insisted on behalf of the plaintiffs that the owner of
property is entitled to a reasonable compensation for its use even when
it is clothed with the public interest, and that the determination of
what is reasonable is a _judicial, not a legislative_, matter. To this
Chief Justice Waite replied that the usual practice had been otherwise.
"In countries where the common law prevails," he said, "it has been
customary from time immemorial for the legislature to declare what shall
be a reasonable compensation under such circumstances, or perhaps more
properly speaking to fix a maximum beyond which any charge made would be
unreasonable.... The controlling fact is the power to regulate at all.
If that exists, the right to establish the maximum of charge as one of
the means of regulation is implied. In fact, the common law rule which
requires the charge to be reasonable is itself a regulation as to
price.... To limit the rate of charge for services rendered in a public
employment, or for the use of property in which the public has an
interest, is only changing a regulation which existed before. It
establishes no new principle in the law, but only gives a new effect to
an old one. We know that this is a power which may be abused; but that
is no argument against its existence. _For protection against abuses by
legislatures the people must resort to the polls, not to the
courts._"[20]
The principle involved in the Munn case also came up in the same year
(1876) in Peik _v._ Chicago and Northwestern Railroad Company, in which
Chief Justice Waite, speaking of an act of Wisconsin limiting passenger
and freight charges on railroads in the state, said: "As to the claim
that the courts must decide what is reasonable and not the legislature,
this is not new to this case. It has been fully considered in Munn _v._
Illinois. Where property has been clothed with a public interest, the
legislature may fix a limit to that which shall be in law reasonable for
its use. This limit binds the courts as well as the people. If it has
been improperly fixed, the legislature, not the courts, must be appealed
to for the change."
The total results of the several Granger cases, decided in 1876, may be
summed up as follows:
(1) That the regulatory power of the state over "public callings" is not
limited to those businesses over which it was exercised at common law,
but extends to any business in which, because of its necessary character
and the possibilities for extortion afforded by monopolistic control,
the public has an interest.
(2) That such regulatory power will not be presumed to have been
contracted away by any legislature, unless such intention is
unequivocally expressed.
(3) That the exercise of such regulatory power belongs to the
legislature, and not to the judiciary.
(4) And the _dictum_ that the judiciary can grant no relief from an
unjust exercise of this regulatory power by the legislature.
Although the denial of the right of the judiciary to review the
"reasonableness" of a rate fixed by the legislature in the Granger cases
had been _dictum_, a case was not long arising in which the issue was
squarely raised. Had this case gone to the Supreme Court, the question
of judicial review would have been decided a full decade or more before
it really was. In this case, the Tilley case, a bondholder of a railroad
operating in Georgia sought to restrain the railroad from putting into
force a tariff fixed by the state railroad commission, on the ground
that it was so unreasonably low as to be confiscatory. Judge Woods, of
the Federal circuit court, refused to grant the injunction, basing his
decision squarely upon the dictum in Munn _v._ Illinois, and declaring
that the railroad must seek relief from unjust action on the part of the
commission at the hands of the legislature or of the people.
It was not till seven years after the Granger cases that another case
involving rate regulation was presented to the Federal courts.[21] The
Ruggles case, brought to the Supreme Court by writ of error to the
supreme court of Illinois, in 1883, involved a conviction of one of the
agents of the Illinois Central Railway for violating a maximum passenger
fare statute of that state, and raised substantially the same question
as all of the Granger cases except the Munn case--the right of the
legislature to regulate the rates of a railroad which was itself
empowered by its charter to fix its own rates. The Court affirmed the
doctrine of the Granger cases, Chief Justice Waite again writing the
opinion. The case is noteworthy only for the opinion of Justice Harlan,
concurring in the judgment, but dissenting from the opinion, of the
Court, in so far as that opinion expressed, as he declared, the doctrine
that the legislature of Illinois could regulate the rates of the railway
concerned, in any manner it saw fit. Justice Harlan argued that inasmuch
as the charter of the railroad had conferred upon it the right to demand
"reasonable" charges, the legislature, when it resumed the power of
fixing charges, was estopped from fixing less than "reasonable" charges;
and should charges lower than "reasonable" be fixed, it would be within
the province of the judicial branch to give relief against such an
impairment of the obligation of contract.
Justice Harlan's opinion is interesting not only because it touches upon
the possibility of a _judicial_ review of the rate fixed by the
legislature; but because the learned Justice bases his contention on the
_contract_ between the railroad and the state to the effect that rates
should be "reasonable." This indicates plainly that not even in the mind
of Justice Harlan, who later became the firm exponent of the power of
judicial review, was there any clear belief that the Fourteenth
Amendment as such gave the Court any power to review the
"reasonableness" of a rate fixed by the legislature. In other words, he
derived his doctrine of judicial review from the power of the Federal
judiciary to enforce the obligation of contracts, and not from its power
to compel "due process of law."
It is impossible to trace here the numerous decisions following the
Ruggles case in which the Supreme Court was called upon to consider the
power of state legislatures to control and regulate corporations,
particularly railways. It is impossible also to follow out all of the
fine and subtle distinctions by which the _dictum_ of Chief Justice
Waite, in the Munn case, to the effect that private parties must appeal
to the people, and not to the courts, for protection against state
legislatures, was supplanted by the firm interpretation of the
Fourteenth Amendment in such a manner as to confer upon the courts the
final power to review all state legislation regulating the use of
property and labor. Of course we do not have, in fact, this clear-cut
reversal of opinion by the Court, but rather a slow working out of the
doctrine of judicial review as opposed to an implication that the Court
could not grant to corporations the relief from legislative interference
which they sought. There are but few clear-cut reversals in law; but the
political effect of the Court's decisions has been none the less clear
and positive.
_The Minnesota Rate Case_
It seems desirable, however, to indicate some of the leading steps by
which the Court moved from the doctrine of non-interference with state
legislatures to the doctrine that it is charged with the high duty of
reviewing all and every kind of economic legislation by the states. One
of the leading cases in this momentous transition is that of the
Chicago, Milwaukee, and St. Paul Railway Company _v._ Minnesota, decided
in 1889, which made a heavy contribution to the doctrine of judicial
review of questions of political economy as well as law. This case
involved the validity of a Minnesota law which conferred upon a state
railway commission the power to fix "reasonable" rates. The commission,
acting under this authority, had fixed a rate on the transportation of
milk between two points.
The railroad having refused to put the rate into effect, the commission
applied to the supreme court of the state for a writ of mandamus. In its
answer the railroad claimed, among other contentions, that the rate
fixed was unreasonably low. The supreme court of the state refused to
listen to this contention, saying that the statute by its terms made the
order of the commission conclusively reasonable; accordingly it issued
the mandamus. By writ of error, the case was brought to the Supreme
Court of the United States, which, by a vote of six to three, ordered
the decree of the state court vacated, on the ground that the statute as
construed by the supreme court of the state was unconstitutional, as a
deprivation of property without due process of law.
The opinion of the Court, written by Justice Blatchford, has frequently
been interpreted to hold, and was indeed interpreted by the dissenting
minority to hold, that the judiciary must, to satisfy the requirements
of "due process," have the power of final review over the reasonableness
of all rates, however fixed. It is doubtful whether the language of the
opinion sustains this reading; but the strong emphasis on the place of
the judiciary in determining the reasonableness of rates lent color to
the contention that Mr. Justice Blatchford was setting up "judicial
supremacy." In the course of his opinion, he said: "The question of the
reasonableness of a rate of charge for transportation by a railroad
company, involving as it does the element of reasonableness both as
regards the company and as regards the public, is eminently a question
for judicial investigation requiring due process of law for its
determination. If the company is deprived of the power of charging
reasonable rates for the use of its property, and such deprivation takes
place in the absence of an investigation by judicial machinery, it is
deprived of the lawful use of its property, and thus in substance and
effect, of the property itself without due process of law and in
violation of the Constitution of the United States."
The dissenting members of the Court in this case certainly saw in
Justice Blatchford's opinion an assertion of the doctrine that whatever
the nature of the commission established by law or the form of procedure
adopted, the determination of rates was subject to review by a strictly
judicial tribunal. In his dissent, Mr. Justice Bradley declared that the
decision had practically overruled Munn _v._ Illinois and the other
Granger cases. "The governing principle of those cases," he said, "was
that the regulation and settlement of the affairs of railways and other
public accommodations is a legislative prerogative and not a judicial
one.... The legislature has the right, and it is its prerogative, if it
chooses to exercise it, to declare what is reasonable. This is just
where I differ from the majority of the Court. They say in effect, if
not in terms, that the final tribunal of arbitrament is the judiciary; I
say it is the legislature. I hold that it is a legislative question, not
a judicial one, unless the legislature or the law (which is the same
thing) has made it judicial by prescribing the rule that the charges
shall be reasonable and leaving it there. It is always a delicate thing
for the courts to make an issue with the legislative department of the
government, and they should never do it, if it is possible to avoid it.
By the decision now made we declare, in effect, that the judiciary, and
not the legislature, is the final arbiter in the regulation of fares and
freights of railroads and the charges of other public accommodations. It
is an assumption of authority on the part of the judiciary which, it
seems to me, with a due reverence to the judgment of my brethren, it has
no right to make.... Deprivation of property by mere arbitrary power on
the part of the legislature or fraud on the part of the commission are
the only grounds on which judicial relief may be sought against their
action. There was in truth no deprivation of property in these cases at
all.... It may be that our legislatures are invested with too much
power, open as they are to influences so dangerous to the interests of
individuals, corporations, and societies. But such is the Constitution
of our republican form of government, and we are bound to abide by it
until it can be corrected in a legitimate way."
_The Development of Judicial Review_
A further step toward judicial review even still more significant was
taken, in the case of Reagan _v._ Farmers' Loan and Trust Company,
decided by the Supreme Court in 1894. This case came up from the Federal
circuit court of Texas which had enjoined the state railway
commissioners from fixing and putting into effect railway rates which
the Trust Company, as a bondholder and interested party, contended were
too low, although not confiscatory.
The opinion of the Court, written by Justice Brewer, who, as Federal
circuit judge, had already taken advanced ground in favor of judicial
review, went the whole length in upholding the right of the judiciary to
review the reasonableness, not only of a rate fixed by a commission, as
in the case in hand, but even of one fixed by the legislature. The case
differed in no essential way, declared the justice, from those cases in
which it had been the age-long practice of the judiciary to act as final
arbiters of reasonableness--cases in which a charge exacted by a common
carrier was attacked by a shipper or passenger as unreasonable. The
difference between the two cases was merely that in the one the rate
alleged to be unreasonable was fixed by the carrier; in the other it was
fixed by the commission or by the legislature. In support of this
remarkable bit of legal reasoning, the opinion adduced as precedents
merely a few brief excerpts, from previous decisions of the Court,
nearly all of which were pure _dicta_.
The absence of any dissent from this opinion, in spite of the fact that
Judge Gray, who had concurred in Justice Bradley's vigorous dissenting
opinion in the Chicago-Minnesota case four years before, was still on
the bench, indicates that the last lingering opposition to the doctrine
of judicial review in the minds of any of the Court had been dissolved.
Henceforth it was but the emphatic affirmation and consistent
development of that doctrine that was to be expected.
If we leave out of account Mr. Justice Brewer's _dicta_ and consider the
Court to have decided merely the issues squarely presented, the Reagan
case left much to be done before the doctrine of judicial review could
be regarded as established beyond all possibility of limitation and
serious qualification. Other cases on the point followed quickly, but it
was not until the celebrated case of Smyth _v._ Ames, decided in 1898,
that the two leading issues were fairly presented and settled. In this
case the rate attacked was not fixed by a commission, but by a state
legislature itself; and the rate was not admitted by the counsel for the
state to be unreasonable, but was strongly defended as wholly reasonable
and just. The Court had to meet the issues.
The original action in the case of Smyth _v._ Ames was a bill in equity
brought against the attorney-general and the Nebraska state board of
transportation, in the Federal circuit court, by certain bondholders of
the railroads affected, to restrain the enforcement of the statute of
that state providing a comprehensive schedule of freight rates. The
bills alleged, and attempted to demonstrate by elaborate calculations,
that the rates fixed were _confiscatory_, inasmuch as a proportionate
reduction on all the rates of the railroads affected by them would so
reduce the income of the companies as to make it impossible for them to
pay any dividends; and in the case of some of them, even to meet all
their bonded obligations. On behalf of the state, it was urged that the
reduction in rates would increase business, and, therefore, increase
net earnings, and that some at least of the companies were bonded far
in excess of their actual value. Supreme Court Justice Brewer, sitting
in circuit, on the basis of the evidence submitted to him, consisting
mainly of statements of operating expenses, gross receipts, and inter-
and intra-state tonnage, found the contention of the railroads well
taken, and issued the injunctions applied for.
The opinion of the Supreme Court, affirming the decree of Judge Brewer,
was, in the essential part of it--that asserting the principle of
judicial review in its broadest terms--singularly brief. Contenting
himself with citing a few short _dicta_ from previous decisions, Justice
Harlan, speaking for the Court, declared that the principle "must be
regarded as settled" that the reasonableness of a rate could not be so
conclusively determined by a legislature as to escape review by the
judiciary. Equally well settled, it was declared, was the principle that
property affected with a public interest was entitled to a "fair return"
on its "fair" valuation. These principles regarded as established, the
Court proceeded to examine the evidence, although it admitted that it
lacked the technical knowledge necessary to a completely equitable
decision; and sustained the finding of the lower court in favor of the
railroads. There was no dissent.
With Smyth _v._ Ames the doctrine of judicial review may be regarded as
fully established. No portion of the judicial prerogative could now be
surrendered without not merely "distinguishing" but flatly overruling a
unanimous decision of the Court.
The significance of Smyth _v._ Ames was soon observable in the
activities of the lower Federal courts. Within the nine months of 1898
that followed that decision, there were at least four applications for
injunctions against alleged unreasonable rates, and in three of these
cases the applications were granted. During the years that followed
Smyth _v._ Ames, Federal courts all over the country were tying the
hands of state officers who attempted to put into effect legislative
measures regulating railway concerns. In Arkansas, Florida, Alabama,
Minnesota, Missouri, Illinois, North Carolina, Louisiana, and Oregon,
rates fixed by statute, commission, or ordinance were attacked by the
railways in the Federal courts and their enforcement blocked. In several
instances the injunctions of the lower courts were made permanent, and
no appeal was taken to the Supreme Court of the United States. With
Smyth _v._ Ames staring them in the face, state attorneys accepted the
inevitable.
The decision in Smyth _v._ Ames left still one matter in doubt. The
allegation of the railroads in that case had been that the rates fixed
were actually confiscatory--that is, so low as to make dividends
impossible. In the course of his opinion, Justice Harlan had stated,
however, that the railroads were entitled to a "fair return," an opinion
that had been expressed also in the Reagan case, where indeed it had
been necessary to the decision, and still earlier, but with little
relevancy, in the Chicago-Minnesota case. In none of these cases,
however, had any precise definition of the terms "reasonable" or "fair"
return been necessary, and none had been made.
The first direct suggestion of the development of the judicial
reasoning on this point that was to take place is found in the Milwaukee
Electric Railway case, also decided in 1898. In that case Judge Seaman,
of the Federal circuit court, found from the evidence that the dividends
of the street railway company for several years past had been from 3.3
to 4.5 per cent, while its bonds bore interest at 5 per cent. Anything
less than these returns, the judge declared, would be unreasonable,
inasmuch as money loaned on real estate, secured by a first mortgage,
was at that time commanding 6 per cent in Milwaukee.
Eleven years later, in 1909, the Supreme Court sustained virtually the
same rule in the New York Consolidated Gas case, holding, with the lower
court, that the company was entitled to _six_ per cent return on a fair
value of its property (including franchises and the high values of the
real estate used by it in the business), because six per cent was the
"customary" rate of interest at that time in New York City. On the same
day the court decided that a return of six per cent on waterworks
property in Knoxville, Tennessee, was also not unreasonable. In neither
of these cases, however, did the Court attempt any examination or
explanation of the evidence on which it rested its determination that
six per cent was the "customary" rate in the places named; nor did it
attempt to explain the principle on which such "customary" rate could be
determined for other times and places. Plainly there is still room for a
great deal of "distinguishing" on this point. The extreme vagueness of
the rule was exemplified by the decision of Federal circuit Judge
Sanborn in the Shephard case (1912), in which he decided that, for a
railroad running through Minnesota, _seven_ per cent was no more than a
"fair" return, and that any reduction in rates which would diminish the
profits of the road below that figure was unreasonable.
Equally important and of as great difficulty are the questions entering
into the determination of a "fair" valuation. This point is both too
unsettled and too technical to render any discussion of it profitable
here. Attention may, however, be called to two of the holdings in the
Consolidated Gas case. In arriving at a "fair" valuation of the gas
company's property, the Court allowed a large valuation to be placed
upon the franchises of the company--none of which had been paid for by
the companies to which they had originally been issued, and which had
not been paid for by the Consolidated Company when it took them over,
except in the sense that a large amount of stock, more than one sixth of
the total stock issued by the company, had been issued against them,
when the consolidation was formed. The particular facts surrounding this
case are such as to make it very easy for the Court to "distinguish"
this case from the usual one, for the consolidation was formed, and its
stock issued, under a statute that authorized the formation of
consolidations, and forbade such consolidations to issue stock in excess
of the fair value of the "property, franchises, and rights" of the
constituent companies. This last prohibition the Court construed as
indicative of the legislative intention that the franchises should be
capitalized. Equally plain is it, however, that this particular
circumstance of the Consolidated Gas case is so irrelevant that it will
offer no obstacle whatever to the Court's quoting that case as a
precedent for the valuation of franchises obtained _gratis_, should it
so desire.
Another holding of great importance in the Gas case was that the company
was entitled to a fair return on the value of real estate used in the
business, that value having appreciated very greatly since the original
purchase of the real estate, and there being no evidence to show that
real estate of so great value was essential to the conduct of the
business.
The importance of these two holdings is exemplified by the fact that in
this particular case the combined value attributed to the franchises and
the appreciation of real estate was over $15,000,000--more than one
fourth of the total valuation arrived at by the Supreme Court. It will
readily be seen that if these two items had been struck from the
valuation by the Court, it would be possible for the state to make a
still further substantial reduction in the rate charged for gas in New
York City without violating the Court's own canon of reasonableness--a
six per cent return.
The steps in the evolution of the doctrine of judicial review may be
summarized in the following manner:
The Supreme Court first declared that the legislative determination of
what was a "reasonable" rate was not subject to review by the courts.
The first departure from this view was an intimation, confirmed with
increasing emphasis in several cases, that a rate so low as to make any
return whatever impossible was confiscatory and would be set aside by
the Court as violating the Fourteenth Amendment. For a time, however,
the Court took the position (steadily undermined in subsequent
decisions) that a rate which allowed some, even though an "unreasonably
low" return, was not prohibited by the Fourteenth Amendment and could
not be set aside by the Court.
Next in order came the holding that the determination of a commission as
to what was reasonable could not be made conclusive upon the courts, at
least when the commission had acted without the forms and safeguards of
judicial procedure, and, probably, even when it had acted with them.
In the same decision appeared an intimation, which in subsequent
decisions became crystallized into "settled law," that not only were
totally confiscatory rates prohibited by the Fourteenth Amendment, but
also any rates which deprived the owners of the property regulated of a
return equal to what was "customary" in private enterprises.
This rule was applied by the Court for the first time against a rate
fixed by a commission, and where the rate was admitted by the pleadings
to be confiscatory. But it was shortly thereafter applied to a rate
fixed by a legislature, and where the "reasonableness" (not the
confiscatory character) of the rate was a direct issue on the facts and
evidence.
Finally, the principle that what is a "fair" or "reasonable" rate is to
be measured by the customary return in private enterprises under similar
conditions, has been applied in several cases to warrant the requirement
of a definite rate of interest; but no precise rules have been laid down
for the determination of such rate in all cases.
The most striking feature, perhaps, of the development of the doctrine
of judicial review here traced, as seen in the opinions of the Supreme
Court, is the brevity and almost fortuitous character of the reasoning
given in support of the most important and novel holdings. A comparison
of the reasoning in Smyth _v._ Ames, for example, with that in Marbury
_v._ Madison, in which Chief Justice Marshall first held a law of
Congress unconstitutional, will forcibly exemplify this. The explanation
is to be found largely in the fact that each step in advance in the
building up of the doctrine had been foreshadowed in _dictum_ before it
was established as decision. It was thus possible for the judge writing
the opinion in a case when a new rule was actually established, to
quote, as "settled law," a mere _dictum_ from a previous opinion.
Justice Gray's citation, in this fashion, in the Dow case, of Chief
Justice Waite's _dictum_ in the Ruggles case (although he might, with
equal cogency, have cited the Chief Justice's contrary _dictum_ in the
Munn or Peik cases), is a good instance of this curious use of
"precedent"; and parallel instances could be adduced from virtually
every one of the important subsequent cases on this subject.[22]
It is apparent from this all too brief and incomplete account of the
establishment of judicial review over every kind and class of state
legislation affecting private property rights that no layman can easily
unravel the mysterious refinements, distinctions, and logical subtleties
by which the fact was finally established that property was to be free
from all interference except such as might be allowed by the Supreme
Court (or rather five judges of that Court) appointed by the President
and Senate, thus removed as far as possible from the pressure of public
sentiment. Had a bald veto power of this character been suddenly vested
in any small group of persons, there can be no doubt that a political
revolt would have speedily followed. But the power was built up by
gradual accretions made by the Court under the stimulus of skilful
counsel for private parties, and finally clothed in the majesty of
settled law. It was a long time before the advocates of leveling
democracy, leading an attack on corporate rights and privileges,
discovered that the courts were the bulwarks of _laissez faire_ and
directed their popular battalions in that direction.
Those who undertake to criticize the Supreme Court for this assumption
of power do not always distinguish between the power itself and the
manner of its exercise. What would have happened if the state
legislatures had been given a free hand to regulate, penalize, and
blackmail corporations at will during the evolution of our national
economic system may be left to the imagination of those who recall from
their history the breezy days of "wild-cat" currency, repudiation, and
broken faith which characterized the thirty years preceding the Civil
War when the Federal judiciary was under the dominance of the states'
rights school. The regulation of a national economic system by forty or
more local legislatures would be nothing short of an attempt to combine
economic unity with local anarchy. It is possible to hold that the Court
has been too tender of corporate rights in assuming the power of
judicial review, and at the same time recognize the fact that such a
power, vested somewhere in the national government, is essential to the
continuance of industries and commerce on a national scale.
* * * * *
Thus far attention has been directed to the activities of the Federal
Supreme Court in establishing the principle of judicial review
particularly in connection with legislation relative to railway
corporations, but it should be noted that judicial review covers all
kinds of social legislation relative to hours and conditions of labor as
well as the charges of common carriers. In 1905, for example, the
Supreme Court in the celebrated case of Lochner _v._ New York declared
null and void a New York law fixing the hours of work in bakeshops at
ten per day, basing its action on the principle that the right to
contract in relation to the hours of labor was a part of the liberty
which the individual enjoyed under the Fourteenth Amendment. Mr. Justice
Holmes, who dissented in the case, declared that it was decided on an
economic theory which a large part of the country did not entertain, and
protested that the Fourteenth Amendment did not "enact Mr. Herbert
Spencer's _Social Statics_."
As a matter of fact, however, the Supreme Court of the United States has
declared very little social legislation invalid, and has been inclined
to take a more liberal view of such matters than the supreme courts of
the states. The latter also have authority to declare state laws void as
violating the Federal Constitution, and when a state court of proper
jurisdiction invalidates a state law, there is, under the Federal
judiciary act, no appeal to the Supreme Court of the United States.
Consequently, the Fourteenth Amendment means in each state what the
highest court holds it to mean, and since the adoption of that Amendment
at least one thousand state laws have been nullified by the action of
state courts, under the color of that Amendment or their respective
state constitutions.
As examples, in New York a law prohibiting the manufacture of cigars in
tenement houses, in Pennsylvania a law prohibiting the payment of wages
in "scrip" or store orders, and in Illinois a statute forbidding mining
and manufacturing corporations to hold back the wages of their employees
for more than a week were declared null and void. Such laws were
nullified not only on the ground that they deprived the employer of
property without due process, but also on the theory that they deprived
workingmen of the "liberty" guaranteed to them to work under any
conditions they chose. In one of these cases, a Pennsylvania court
declared the labor law in question to be "an insulting attempt to put
the laborer under a legislative tutelage which is not only degrading to
his manhood but subversive of his rights as a citizen of the United
States."
Where the state court nullified under the state constitution, it was of
course relatively easy to set aside the doctrines of the court by
amending the constitution, but where the state court nullified on the
ground of the Fourteenth Amendment to the Federal Constitution, there
was no relief for the state and even no appeal for a review of the case
to discover whether the Supreme Court of the United States would uphold
the state tribunal in its view of the national law. Under such
circumstances, the highest state court became the supreme power in the
state, for its decrees based on the Federal Constitution were final. It
was the freedom, one may say, recklessness, with which the courts
nullified state laws that was largely responsible for the growth of the
popular feeling against the judiciary, and led to the demand for the
recall of judges.[23]
FOOTNOTES:
[13] A. R. Conkling, _Life of Roscoe Conkling_, p. 297.
[14] A. R. Conkling, _Life of Roscoe Conkling_, p. 699.
[15] _Ibid._, p. 671.
[16] _Ibid._, pp. 679 ff.
[17] See below, p. 57.
[18] _Ibid._, p. 540.
[19] Taylor, _Origin and Growth of the American
Constitution_, p. 355. As a matter of fact, Conkling, who was
a member of the committee that drafted the Fourteenth
Amendment, voted against these provisions in Committee.
[20] It is to be noted that the demand of the warehousemen on
the second point was not for a judicial _review_ of the
reasonableness of a rate fixed by the legislature, but a
total _denial_ of the _power_ of a _legislature_ to act in
the matter. The question of the propriety of a judicial
review of the reasonableness of the rates in question was not
raised in the pleadings. It was not difficult, therefore, for
judges in subsequent cases in which the question of judicial
review was squarely raised to explain away as mere _dictum_
this solemn statement by Chief Justice Waite to the effect
that the power of the legislature to regulate being conceded,
the determination of the legislature was binding on the
courts and not subject to review.
[21] Except for two unimportant cases decided in the lower
courts.
[22] It should be noted that the Supreme Court not only
undertook to pass upon the reasonableness of such rates as
the states were permitted to make, but also added in 1886
that no state could regulate the rates on goods transported
within its borders, when such goods were in transit to or
from a point in another state. Such regulation was held in
the Wabash, etc., Railway Company _v._ Illinois (118 U. S.
557) to be an interference with interstate commerce which was
subject to control by Congress only.
[23] Below, p. 287.