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; The Commoner
ISSUED WEEKLY
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THE COMMONER, Lincoln, Neb.
tho cost of reproducing tho property may be
ascertained with a proper degree of certainty.
But it docs not justify the acceptance of the re
sults which depend upon the mere conjecture."
Justico Hughes said that the railroad would
have no ground to complain if it were allowed
a value for its land equal to the fair average
market value of similar lands in the vicinity,
without additions by the use of multipliers, or
otherwise to cover hypothetical outlays.
In criticizing the apportionment of valua
tion between interstate and intrastate business
upon tho "gross revenue basis" Justice Hughes
said that tho division should be made according
to the use that is made of the property. He
declared that this use could not be measured
by the return, when the return itself was in
question. "If tho return bo taken as the basis'
said ho, "then the validity of the state's reduc
tion of rates would have to bo tested by the
very rates which the state denounced as exorbi
tant. Ho added that it would not be impossible
to ascertain some kind of uso units by which the
property could be divided both between inter
state and intrastate business on tho one hand
and between passenger and freight business on
tho other. Ho did not point out what this
"unit" would bo.
Justice Hughes next considered tho lower
court's plan of apportioning expenses on tho
basis that it cost two and a half times as much
to- do intrastate freight business as it did to do
interstate, aB well as a larger amount to do
intrastate passenger business than to do inter
state. Ho said that the expenses had not been
hept separately in-tho accounts of statistics of
tho company and that testimony as to these ex
penses varied widely and that the intricate ques
tion of whether tho rates were confiscatory could
not bo decided on proof of such a general
character.
t Applying these principles to tho Northern
Pacific, the justico held that neither the value
,of the property employed nor the shares of ex
penses attributed to interstate business-had
been proven satisfactorily to show that the
railroads' property was confiscated. A similar
conclusion was reached by applying tho prin
ciples to the Great Northern railroad.
Coming to tho Minneapolis and St. Louis ho
found the net return in 1908 to that road was
less than 3 per cent and that errors in esti
mating value and of apportionment were not
sufficient to change ,the result.
HISTORY OP THE CASES
Tho so-callod "state rate" cases have pre
sented to the supreme court one of the momen
tous problems of the decade.
In general terms, this group of caseB called
upon tho court to decide two questions. Ono
was whether tho states in passing maximum
freight and 2-cent passenger laws had unduly
interfered with interstate commerce. Tho other
was whether those laws confiscated tho property
of the railroadB by requiring them to transact
business-at a loss.
Tho group consistod of forty-five cases All
arose out of legislation enacted by state legisla
tures about 1907, or just after the federal gov-
The Commoner.
9
m
ernment had passed tho Hepburn rate law. Tho
forty-live cases concerned directly tho laws in
six states, Missouri, Minnesota, Kentucky, Ore
gon, Arkansas and West Virginia. Similar liti
gations arose in Alabama, Iowa, Kansas, Ne
braska, Oklahoma and South Dakota. In all,
it was said that seventy-six suits in federal
courts depended upon the decision in the forty
fivo cases before the supreme court.
The first of the forty-five cases to reach the
supreme court were the Missouri rate cases.
In Missouri the eighteen railroadB crossing the
state attacked, in separate suits, the validity of
stato laws fixing the "maximum rate on freight
and limiting passenger fares to 2 cents a mile.
Judgo McPherson, of the United States circuit
court for western Missouri, held that the rates
were confiscatory of tho railroads' 'property, and
therefore unconstitutional, but he declined to
hold that they interfered with interstato com
merce. Both the railroads and the state ap
pealed to the supreme court, bringing, in all,
thirty-six Missouri cases. Two cases growing
out of "the Burlington suit" were presented to
the court in October, 1910, but they were re
stored to the docket for argument with the
other Missouri cases in April, 1912. The state
protested that Judge McPherson should not have
apportioned expenses, as between state and
interstate business, on a revenue basis, but
rather on a car-mile, or ton-mile basis.
The Minnesota rate cases arose out of cases
by stockholders of tho Northern Pacific, tho
Great Northern and the Minneapolis and St.
Louis railroads against the companies to enjoin
them from obeying the maximum freight and
2-cent passenger laws aB unconstitutional, and
against the state officials to enjoin them from
enforcing the laws. Judge Sanborn, of the
United States circuit court for Minnesota, held
the laws unconstitutional, of a confiscatory na
ture, and that they burdened interstate com
merce. The three suits were appealed to tho
supreme court. The contest over the inter
state commerce feature of the controversy was
similar to that in the Missouri cases.
In the Missouri cases, however, the state and
tho railroads had agreed upon the valuation of
the railroads, upon which the percentage of in
come from rates was to be figured. No such
agreement was reached in the Minnesota' cases,
and a bitter contest arose over the holding of
Judge Sanborn that the fair valuation of a rail
road property was its "cost of reproduction
new."
The Kentucky rate case arose over state
rates on grain from Ohio river points to inland
distillery cities. Unliko the Missouri and Min
nesota cases, it did not embrace a claim of con
fiscation. Points raised were that the rates
laid an improper burden upon interstate com
merce and that the McCord act, authorizing the
state railroad commission to fix reasonable rates
was unconstitutional. JudgeB "Warrington,
Denison and Sanford, of the United States cir
cuit court for eastern Kentucky; upheld the
McChord act and the rates in question.
In the Oregon cases it was claimed that there
was an interference with interstate commerce.
The Oregon railroad and Navigation company
claimed that the state railroad commission in
reducing the state freight rates from Portland
to eastern Oregon cities effected a reduction of
interstate rates to those cities, because the state
rates were used as a basis for the interstate
rates. A similar claim was made by the "South
ern Pacific company as to rates along its line.
The United States circuit court for Oregon up
held the rates. An attack was also made upon
tho constitutionality of the law creating the
Oregon railroad commission. That, too, was
upheld by tho lower court.
In the Arkansas cases, brought by the St
Louis, Iron Mountain & Southern railway, and by
the St. Louis Southwestern railway, the United
States circuit court for eastern Arkansas held
that the maximum freight rate orders and the
2-cent passenger fare law were unconstitutional
becauso they were confiscatory,
xv TS West YirSinia case arose out of a suit bv
the Chesapeake & Ohio Railway company to test
the validity of the 2-cent passenger law The
supreme court of West Virginia upheld the law!
Sioux City (Iowa) Journal. w
IS THE LIMIT OP FEDERAL POWER
AS VAGUE AS EVER?
Tho Minnesota rate decision is characterized
UmidiS ! Cmm0n Ben8G and tattuStalS
Tho right to regulate interstate rates be
longs, under tho constitution, to conW
Owing to geographical considerations it 5 1
possible to exercise tho power of maktagriS
VOLUME 13, NUMBER 24
within a- state without thereby affeetin i .
state rates in certain cases. A familiar Li ,
is the St. Louis-Kansas City rate atS Pe
purely, which affects tho East St. Lou8.l!at6
City rate, which is interstate. Th8 ia ?
point on which tho Minnesota caso tiiVS?
Since the state of Minnesota bas no powor 1 '
interstate rates, should it be permitted to mJvI
stato rates which necessarily affect them'
To this question the court, speaking throne
Justice Hughes, returned tho answer of com
mon sense. The state's power over rates within
its borders is beyond question. Tho indS
effect of the exorcise of that power is Borne!
thing for which the state has no responsibility
and with which congress has never concerned
itself.
This decision seems to bo bottomed on the
familiar principle that tho possession of a right
carries with it perforce those things without
which tho right could not bo freely exercised
All actions have effects beyond tho parties and
things immediately concerned. If stato rights
whose exercise affects things in the federal do
main are to be restricted, no room will be left
for the exercise of any state rights oJ all. Judge
Sanborn's decision was that of a theorist; the
supreme court decision is that of men familiar
with tho laws which govern practical affairs.
But when we turn from the very satisfactory
practical side of the decision to its treatment
of the tremendously important question of the
relative limits of state and federal powers, we
enter a region of twilight and timidity. The
decision, here, is anything but full and clean
cut. It appears to claim for congress by in
direction all the power which congress is
minded to assume. In view of the elementary
fact that the constitution is a limited instru
ment, it is singular to find the state power
treated in this decision as if existing on suf
ferance and only because congress has not seen
fit to assert itself in the matters in question.
We quote:
"The idea that the power of the state to fix
reasonable rates for its internal traffic is limited
by the mere' action of the carrier in laying an
interstate rate to places across the state's bor
der is foreign to our jurisprudence. If this
authority of the state bo restricted, it must be
by virtue of the paramount power of congress
over interstate commerce and its instruments."
Again:
"If this authority of the state he restricted,
it must be by virtue of the actual exercise of
federal control and not by reason merely of a
dormant federal power; that is, one which bas
not been exerted."
If the portion of the decision which has al
ready been published is fairly representative of
its scope, the ultimate question raised by tho
Minnesota cases is as far from solution as it
was before this decision was rendered. That
is the question of the relative powers of the
state and federal governments in that portion
of the field of intrastate commerce where inter
state rates are affected. Their honors have con
tented themselves with declaring that, in tne
absence of specific federal legislation, the states
rights may be freely exercised. They have
least hinted that the federal power might seri
ously circumscribe those rights were it so dis
posed. The decision has tho immediate prac
tical importance that always attaches to a jun
cial application of a common sense principle w
a concrete case. But it leaves one of the most
difficult questions in our jurisprudence ana
one which the country believed to be on uw
point of determination as much in the oar
aa it was. States will continue for the preset
to fix maximum rates and their action win
upheld by the courts. But the limit of iw
federal power remains just as vague as ever.
St, Louis Republic.
-
A POLITICAL ISSUE?
Following is an Associated Press ;, displ
Washington, D. C, June 10. Republican mew
bers of congress see in the decision or
supreme court in the Minnesota rate case i
terday, a- political issue of large Importance.
They agreed to prepare an organized au
on the democratic policy of states' rights on v
issue. apnta
In the house of representatives RePf-efluon
tive Willis of Ohio, member of the committee
interstato and foreign commerce, has Dee
quested by his colleagues to prepare a J"1 s9
introduction at the next session of Dbtate
which will extend the power of tho Yn tho
commerce commission over all railroads i
manner indicated by tho supreme couri u
ing within the rights of congress. 0f
Th republicans believe that reguiatiou
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