The Chief Justiceship of Melville W. Fuller, 1888-1910

4. Safeguarding Entrepreneurial Liberty

4 SAFEGUARDING ENTREPRENEURIAL LIBERTY Building upon earlier constitutional developments and fashioning innovative doctrines, the Fuller Court markedly intensified the constitutional protection of economic interests. The justices heard a steady stream of cases challenging the constitutionality of state and federal economic regulations and taxes. Never before had the Supreme Court exercised the power ofjudicial review so actively. Yet, somewhat surprisingly, given the Court's reputation as a bastion of laissez-faire thought, most regulations were found to pass muster. RAILROAD REGULATION One of the most persistent and difficult issues of the Fuller era was the extent to which the state or federal governments could control operations of privately-owned railroad companies. As the principal artery of interstate commerce and travel, railroads occupied a unique spot in American life during the Gilded Age.l Railroading was a capital-intensive enterprise that required a continuous flow of funds to establish new routes and make necessary improvements. Despite an enormous increase in the amount of track and volume of business, many railroads in the 1890s experienced financial problems resulting from keen competition between carriers as well as the depressed national economy. Many lines went bankrupt and were placed under federal court receivership. Shippers and farmers, on the other hand, perceived the railroads as wielding monopoly power and charging excessive rates. Responding to a clamor for public control, in the 1870s western and southern states enacted socalled Granger laws, under which commissions regulated the prices 1. Harold U. Faulkner, Politics, Reform, and Expansion: 1890-1900 (New York: Harper and Row, 1959),75-76 83 84 THE CHIEF JUSTICESHIP OF MELVILLE W. FULLER, 1888-1910 charged by railroads for the transportation of passengers and freight. In 1886, however, the Supreme Court ruled that under the commerce clause the states could not regulate rates for interstate transportation. This decision caused Congress to enact the Interstate Commerce Act the following year. The first important affirmative use of federal regulatory authority, the act created a new agency, the Interstate Commerce Commission (ICC), to supervise railroad operations.2 The ICC was authorized to conduct hearings, gather information, and issue orders against practices that violated the act. However, the ambiguous provisions ofthe act raised a number of interpretative problems for the Fuller Court. The measure declared that charges for interstate railroad transportation should be reasonable and just but did not define reasonableness or expressly give the ICC power to set rates. Section 4 made it unlawful for a carrier to discriminate between long hauls and short hauls in fixing rates "under substantially similar circumstances." The act also prohibited the pooling of traffic among carriers as well as the practice of granting rebates or preferred treatment to favored shippers. Railroad leaders were ambivalent about the growing web of state and federal regulations.3 They preferred federal supervision to inconsistent and sometimes oppressive state laws. Some carriers hoped that national controls might help to stabilize the highly competitive industry. But most railroad officials were hostile to government control of their rates. They feared that lawmakers would seek to benefit politically powerful shippers and farmers at the expense of the roads by imposing unreasonably low charges. Such an outcome would threaten the long-term economic health of the railroads by discouraging capital investment. Under these circumstances, the carriers looked to the Supreme Court as a bulwark against excessive regulation. Although it was broadly sympathetic to the position of the railroads, the Court accepted the basic premise that they were subject to a degree of public control. Regulation of railroads was predicated on the notion that, as common carriers, the roads had assumed certain obligations to the public. In a line of decisions during the 1890s, however, the justices acted to curtail regulatory authority, leave key decision making in the hands of the lines, and preserve the operation of the free market. 2. Kermit L. Hall, The Magic Mirror: Law in American History (New York: Oxford University Press, 1989), 204-206. 3. Morton Keller, Affairs of State: Public Life in Late Nineteenth Century America (Cambridge , Mass.: Harvard University Press, 1977),427-430. SAFEGUARDING ENTREPRENEURIAL LIBERTY 85 The Fuller Court initially moved to intercede in the state regulation of intrastate railroad charges. The decision in Chicago, Milwaukee & St. Paul Rnilway Company v. Minnesota (1890) was a significant turning point in the Court's handling of rate regulations. At issue was a Minnesota commission order to reduce the charge for carrying milk on certain routes within...