present offered act (services) in the absence of any offered promise by A to do the act. Moreover, if the editor were to be taken literally in the above quotation and he were to adhere to his idea in the preceding footnote on page 24 that promises are acts, then it would seem to follow that the acceptance of a promise by an offeree's promise would be impossible, for the offeror's promise (act) thus accepted would be a past consideration.

E. H. W.

Freedom of Speech in War Time. By Zachariah Chafee, Jr. Reprinted from the Harvard Law Review, Vol. XXXII, No. 8, pp. 932-973.

Students of law and of history are indebted to the author of this paper for an able discussion of one of the most interesting problems of this time and of all times. They will find material for reflection in the not too agreeable story of prosecutions under the Espionage Act, and the bibliographical notes are likely to invite a further inquiry into the history of free speech in its relation to free government, especially during war time.

The study is concerned far less with the constitutionality of the Espionage Act than with its interpretation by the courts, and the conclusion reached is that it has been interpreted in such a way as to violate the free speech clause of the First Amendment and the plain words of the act itself, not to mention the well-established principle that criminal statutes are to be construed strictly.

Space does not permit a review of the valuable historical treatment of the problem. The story centers about the disappearance of the doctrines of "bad tendency" and "presumptive intent," doctrines applied but once in the history of this country, in prosecutions under the Sedition Act of 1798. The revival of such doctrines since 1917, in prosecutions under the Espionage Act, has justly occasioned alarm and Mr. Chafee is by no means alone in voicing a protest against their employment.

The Supreme Court of the United States, speaking through Mr. Justice Holmes, in the case of Schenck v. United States,249 U. S. 47, appeared to be in accord with sound liberal opinion when it declared that:

"The question in every case is whether the words used are used in such circumstances and are of such a nature as to create a clear and present danger that they will bring about the substantive evils that Congress has a right to prevent. It is a question of proximity and degree."

While the substantive evils are not defined, such a rule would seem to offer reasonable latitude for public discussion and in comparison with the interpretation of the Espionage Act by inferior courts it might be thought to leave little to be desired. The Supreme Court seems to have lapsed somewhat in the Debs case, and in the case of Abrams v. United States, decided after the publication of this paper, we find Justice Holmes in vigorous dissent. In his opinion "only the emer

gency that makes it dangerous to leave the correction of evil counsels to time warrants making any exception to the sweeping command 'Congress shall make no law abridging the freedom of speech."" The contention of Justice Holmes must indeed be gratify

ing to the author of this study.

J. P. Bretz.

Books Received

Cases on the Law of Evidence. By Edward W. Hinton. West Publishing Company, St. Paul.

County Administration. By Chester C. Maxey. The Macmillan Company, New York.

Educational Legislation and Administration in the State of New York from 1777 to 1850. Supplementary Educational Monographs, vol. 3, no. 1. The University of Chicago, Chicago.

On Jurisprudence and the Conflict of Laws. By Frederick Harrison. Oxford University Press, New York.

Justice and the Poor. By Reginald Heber Smith. The Carnegie Foundation for the Advancement of Teaching. Bulletin 13. New York.

The League of Nations: Its Principles Examined. By Theodore Marburg. The Macmillan Company, New York.

The State and the Nation. By Edward Jenks. E. P. Dutton Company, New York.

The Unsound Mind and the Law. By George W. Jacoby. Funk &

Wagnalls Company, New York.

Volume V

MARCH, 19.0

Number 3

The Struggle for Higher Public Utility Rates Because of War Time Costs

BY GODFREY GOLDMARK1

Perhaps in no one branch of the law has the World War and its effect given rise to more litigation and to the necessity for the solution of more legal problems than in that relating to public utility corporations and the rates chargeable by them. The struggle has been three sided, and has involved the relative powers and functions of the state legislatures, their administrative agencies, the public service or public utility commissions, and the municipal or city governments. Particularly bitter has been the struggle between the municipal authorities on the one hand and the various public service commissions on the other, with the general attitude of the commissions favorable to the granting of relief to the companies, and with the municipalities fighting bitterly to avoid this result in some cases, and in others resenting the assumption of power by the state-created commissions, irrespective of the merits of the particular application at hand. Much of the difficulty has arisen from general hostility to public service corporations and from the prevalent belief that in times gone by their franchises were illegally or fraudulently obtained, and that their security issues do not represent real investment but the capitalization at excessive values of mere intangible rights and hopes for the future. The situation has also been confused because of the absence of any definite and exact method of determining quickly or accurately the actual value of corporate property employed in the public service upon which a return is to be based, and because of the conflicting theories as to the method of valuation which must be employed.

In the Minnesota Rate Cases2 the Supreme Court says: "The ascertainment of that value (fair value) is not controlled by artificial rules. It is not a matter of formulas but there must be a reasonable judgment having its basis in a proper consideration of all relevant facts."

Of the New York City bar. Recently Chief Counsel to the Public Service Commission of the State of New York for the First District.

2230 U. S. 352, 434 (1912).

From the time of the creation of the Interstate Commerce Commission and from the subsequent creation of the various railroad and public service comimssions, the universal aim in view has been the reduction of rates or charges for the benefit of the public. These subordinate bodies primarily were brought into being to provide permanent tribunals where unjust practices of the public service corporations could be remedied and where what were believed to be excessive rates could be reduced. As business increased and costs went down it became a decided political asset to be able to point to an enforced reduction of rates as a basis for a claim to popular support. Street railroads throughout the country obtained franchises which fixed the five cent fare as the maximum charge, and when from time to time efforts were made to reduce such rates, they were met by vigorous appeal to the Fourteenth Amendment and the clause of the Federal Constitution prohibiting the impairment of contracts.

With the coming of the War, and particularly after the entry of this country into the struggle in April, 1917, conditions were changed. Labor and materials advanced in price by leaps and bounds, either through the yielding to the demands of labor by the companies or through the awards of the various government boards which fixed wages and controlled the distribution of essential materials. As a result many of the companies found that not only were they not receiving a fair return on the property which they employed in the service of the public, however its value was determined, but that fixed charges and operating and maintenance expenses were not being earned. Then it was that the various utility companies commenced their efforts to obtain increased revenue and sought to brush aside every statute and franchise and every contract with private consumers which stood in the way of larger returns.

The legal problems which have been presented fall into various groups and a comprehensive discussion of the present state of the law necessitates a precise determination of the particular source of the pre-existing rates, whether fixed by statute, municipal franchise or private contract, and also a consideration of the particular form in which the application for relief was made. The following headings indicate the scope of the problems which have arisen.

1. Jurisdiction of equity to afford relief from confiscatory statutes. 2. Jurisdiction of the public service commissions to increase rates fixed by statute.

3. Jurisdiction of public service commissions to increase rates fixed by franchises granted by municipalities, where the right of the muni

Saratoga Springs v. Saratoga Gas E. L. & P. Co., 191 N. Y. 123, 150 (1908); annual message of Governor Hughes, January 2, 1907, public papers of Governor Hughes, p. 31; City of Troy v. United Traction Co., 202 N. Y. 333 (1911).

cipality to enter into a contract fixing a rate or to impose regulations is derived by delegation of power from the state legislature.

4. Jurisdiction of the state legislature or of public service commissions to increase street railroad fares fixed by franchises or consents granted by municipalities, where such franchises or consents to construction were given pursuant to provisions of the state constitution and a provision limiting the rate of fare was imposed as a condition to the granting of such consent.

The jurisdiction of a court of equity, as distinguished from a legislative agency, to override fare provisions in a contract with the municipality, because the rate fixed has become unremunerative and the contract practically impossible of performance.

6. The effect of long term service contracts between private consumers and public utility companies.

The particular problem arising in the City of New York out of the dual subway contracts.

Before discussing these various questions it is well to point out that the universal holding is that the state's power to regulate rates may be delegated to inferior tribunals such as public service commissions, provided that a standard is fixed as a guide for quasi-judicial action, but that a public service commission has no greater power or jurisdiction than delegated to it by the state legislature. Except where otherwise indicated, the discussion which follows assumes that the public service commission has been authorized to exercise such power as the legislature may possess.

I

Jurisdiction of Equity to Afford Relief from Confiscatory Statutes.

In so far as rates were fixed by legislative enactment and there was no express delegation to the Public Service Commission of the right to increase statutory rates, the legal procedure to obtain relief was not new nor difficult. The courts in many cases had held that public utility companies were entitled to earn a reasonable return upon the fair value of the property which they employed in the public service and that any statute which fixed a rate insufficient to yield such a return was, as to the particular company affected, confiscatory and void because it deprived the company of its property without due

'Saratoga Springs v. Saratoga G. E. L. & P. Co., supra, note 3; Atlantic Coast Line R. R. Co. v. N. C. Corp. Comm., 206 U. S. 1 (1907); Oregon R. R. & N. Co. v. Fairchild, 224 U. S. 510, 529 (1912).

People ex rel. Quinby v. Pub. Serv. Com., 223 N. Y. 244 (1918); People ex rel. N. Y. Railways v. Pub. Serv. Com., 223 N. Y. 373 (1918).

"Reagan v. Farmers' Loan and Trust Co., 154 U. S. 362 (1894); Smyth v. Ames, 169 U. S. 466 (1898); Knoxville v. Knoxville Water Co., 212 U. S. 1 (1909); Ex parte Young, 209 U. S. 123 (1908); Willcox v. Consolidated Gas Co., 212 U. S. 19 (1909).