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In Murray v. Chicago & N. W. Ry. Co.38 the argument ab inconvenienti is adopted as controlling.

The doctrine that in the absence of congressional action, these common-law principles should apply even with reference to interstate commerce carriers was declared in a number of cases, and without serious dissent;39 but in Western Union Tel. Co. v. Call Pub. Co.40 the point was pressed that the giving to state law an operation over interstate commerce with reference to matters not purely local was unconstitutional. The court reaffirmed the doctrine, but as will appear from the following quotations from its opinion, upon no stronger grounds than convenience and necessity. The court say:

"The contention of the telegraph company is substantially that the services which it rendered to the publishing company were a matter of interstate commerce; that Congress has sole jurisdiction over such matters, and can alone prescribe rules and regulations therefor; that it had not, at the time the services were rendered, prescribed any regulations concerning them; that there is no national common law, and that whatever may be the statute or common law of Nebraska is wholly immaterial; and that, therefore, there being no controlling statute or common law, the court erred in holding the telegraph company liable for any discrimination in its charges between the plaintiff and the Journal Company. The logical result

of this contention is that persons dealing with common carriers engaged in interstate commerce and in respect to such commerce are absolutely at the mercy of the carriers. It is true, counsel do not insist that the telegraph company or any other company engaged in interstate commerce may charge or contract for unreasonable rates, but they do not say that they may not; and if there be neither statute nor common law controlling the action of interstate carriers, there is nothing to limit their obligation in respect

38 62 Fed. Rep. 24.

39 Interstate Commerce Com. v. B. & O. R. R. Co., 145 U. S. 263; 12 Sup. Ct. Rep. 844; 36 L. ed. 699; Bank of Kentucky v. Adams Express Co., 93 U. S. 174; 23 L. ed. 872; Murray v. C. & N. W. R. R. Co., 62 Fed. Rep. 24. 49 181 U. S. 92; 21 Sup. Ct. Rep. 561; 45 L. ed. 765.

to the matter of reasonableness. We should be very loth to hold that in the absence of congressional action there are no restrictions on the power of interstate earriers to charge for their services; and, if there be no law to restrain, the necessary result is that there is no limit to the charges they may make and enforce. Common carriers, whether engaged in interstate commerce or in that wholly within the State, are performing a public service. They are endowed by the State with some of its sovereign powers, such as the right of eminent domain, and so endowed by reason of the public service they render. As a consequence of this, all individuals have equal rights both in respect to service and charges. . To affirm that a condition of things exists under which common carriers anywhere in the country, engaged in any form of transportation, are relieved from the burdens of these obligations, is a proposition which, to say the least, is startling. Can it be that the great multitude of interstate commercial transactions are freed from the burdens created by the common law, as so defined, and are subject to no rule except that to be found in the statutes of Congress? We are clearly of opinion that this cannot be so, and that the principles of common law are operative upon all interstate commercial transactions, except so far as they are modified by congressional

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§ 343. State Regulation of Railway Rates.

The general constitutional power of the States to regulate the rates of public service corporations, including railway and other transportation corporations, whether of domestic or foreign incorporation, as well as of industries affected by a public interest is well established. The only federal limitations upon this power

41 See also Sherlock v. Alling, 3 Otto, 99; 23 L. ed. 819; Missouri R. R. Co. v. Larabee Flour Co., 211 U. S. 612; 29 Sup. Ct. Rep. 214; 53 L. ed. 352; McNeill v. Southern R. R. Co., 202 U. S. 543; 26 Sup. Ct. Rep. 722; 50 I. ed. 1142; Chicago R. R. Co. v. Solan, 169 U. S. 133; 18 Sup. Ct. Rep. 289; 42 L. ed. 688; Lake Shore R. R. Co. v. Ohio, 173 U. S. 285; 19 Sup. Ct. Rep. 465; 43 L. ed. 702. Cf. Columbia Law Review, IX, 375, article by E. Parmalee Prentice, "Federal Common Law and Interstate Commerce."

are: those of the Fourteenth Amendment requiring the equal protection of the laws and that the rates thus fixed shall not be so unreasonable as to amount to a taking of property without due process of law; and that under the guise of an attempt at the regulation of domestic services interstate commerce shall not be unduly affected. That to a certain extent the regulation of domestic railway rates should affect interstate service has been recognized by the courts as unavoidable, but, so long as this interference is not too pronounced or serious, the laws have not been held thereby unconstitutional and void.42

42 There are eminent jurists who, however, hold that the Supreme Court has been too extreme and, indeed, illogical, in the degree in which it has permitted the States, in the regulation of domestic railway rates, substantially to affect interstate rates. Certain it is that under the pressure of increased need, there is the way opened for the federal courts, when they desire to do so, greatly to limit, by a stricter construction of state laws, the powers at present enjoyed and exercised by the States in the regulation of domestic railway rates. Judge Amidon in an address before the American Bar Association, delivered in 1907, has excellently expressed this point of view. He says: "Whenever a State prescribes a schedule of rates for local business, it thereby directly and necessarily regulates interstate business as well. There can be no sudden lifts and falls at state lines. They have no relation whatever to the cost of service, and can afford no justification for discrimination in rates. As the result of the schedule of rates prescribed by the State of Minnesota during the past winter, the rates on the western side of an invisible line were from twenty-five to fifty per cent. higher than those on the eastern side. The railroads could not maintain both these rates without discriminating against North Dakota points in a manner which would constitute a gross violation of that portion of the interstate commerce act which forbids discrimination against any locality. The necessary result of the enforcement of the local rates was to compel a reduction of all through rates. This the Supreme Court has decided is such a direct interference with interstate commerce as to render the action of the State void. But further, if one State may prescribe a schedule of rates, all States may, and the inevitable result of such a practice is to place the whole body of interstate commerce under the actual domination of state laws. In that way the authority which extends to only fifteen per cent. of the business, regulates the entire business. The necessary consequence is that either the nation must take control of railroad transportation within the States or the States will take control of such transportation among the States. We deceive ourselves by a mere form of words when we speak of the separate regulation of local business by the State and through business by the nation. The State cannot formulate and enforce any schedule of rates which will not necessarily and directly regulate interstate rates; neither can the

In a series of cases beginning with Munn v. Illinois13 the court conceded to the States the constitutional power to fix rates of public service corporations with reference not only to purely domestic business, but to the portions of interstate services performed within the State.44 But in Wabash, St. L. & P. R. Co. v. Illinois a quite different doctrine is declared, the court holding that the state laws fixing railway rates cannot be applied to any part of an interstate transportation. The court say: "If the Illinois statute could be construed to apply exclusively to contracts for carriage which begins and ends within the State, disconnected from a continuous transportation through or into other States, there does not seem to be any difficulty in holding it to be valid.” But this, the court held, was not the limited effect of the statute, and, after reviewing the earlier cases, the court declare: "We must therefore hold that it is not, and never has been, the deliberate opinion of a majority of this court that a statute of a State which attempts to regulate the fares and charges of railway companies within its limits, for a transportation which constitutes a part of commerce among the States, is a valid law."

In Covington & Cincinnati Bridge Co. v. Kentucky46 the question is again carefully examined, and the doctrine of the Wabash case affirmed. "To that doctrine," the court declare, "we still adhere." In this bridge case it was held that a State is without the power to regulate tolls upon a bridge connecting the State with another State.

In still further limitation of the power of the States to regu late domestic rates of public service corporations, is the doctrine nation formulate and enforce any schedule of interstate rates which will not necessarily and directly change local rates. The truth is that governmental regulation of rates is not a regulation of commerce, but of the railroads as an instrument of commerce, and when the nation and the State both prescribe to a railroad a schedule of rates. they are both regulating the same thing. This gives rise to a conflict of authority which Marshall declared in Gibbons v. Ogden ought never to be permitted to occur."

43 94 U. S. 113; 24 L. ed. 77.

44 C. B. & Q. R. Co. v. Iowa, 94 U. S. 155; 24 L. ed. 94; Peik v. C. & N. W. R. Co., 94 U. S. 164; 24 L. ed. 97.

45 118 U. S. 557; 7 Sup. Ct. Rep. 4; 30 L. ed. 244.

46 154 U. S. 204; 14 Sup. Ct. Rep. 1087; 38 L. ed. 962.

that a State, in determining whether a proposed rate will leave a reasonable net profit to the company, may not take into consideration the entire business of the company if some of that business is interstate in character. In Smyth v. Ames47 the justice says: "In my judgment it must be held that the reasonableness or unreasonableness of rates prescribed by a State for the transportation of persons and property wholly within its limits must be determined without reference to the interstate business done by the carrier, or to the profits derived from it. The State cannot justify unreasonably low rates for domestic transportation, considered alone, upon the ground that the carrier is earning large profits on its interstate business, over which, so far as rates are concerned, the State has no control. Nor can the carrier justify unreasonably high rates on domestic business upon the ground that it will be able only in that way to meet losses on its interstate business. So far as rates of transportation are concerned, domestic business should not be made to bear the losses on interstate business, nor the latter the losses on domestic business. It is only rates for the transportation of persons and property be tween points within the State that the State can prescribe; and when it undertakes to prescribe rates not to be exceeded by the carrier it must do so with reference exclusively to what is just and reasonable, as between the carrier and the public, in respect of domestic business. The argument that a railroad line is an entirety; that its income goes into, and its expenses are provided for, out of a common fund; and that its capitalization is on its entire line, within and without the State,- can have no application where the State is without authority over rates on the entire line, and can only deal with local rates, and make such regulations as are necessary to give just compensation on local business."

It is established that the fact that a railway company is organized under a federal charter does not exempt it from the same regulative control by the States as that to which state chartered companies are subject. This doctrine is stated in Reagan v. Trust Co.,48 the court pointing out that it is to be presumed that Con

47 169 U. S. 466; 18 Sup. Ct. Rep. 418; 42 L. ed. 819.
49 154 U. S. 418; 14 Sup. Ct. Rep. 1062; 38 L. ed. 1030.

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