The Railroad Commission Cases, , is a United States Supreme Court case concerning the power of states to set transportation charges of railroad companies. The Court held that the fixing of freight and passenger rates in railroad tansportation was a permissible exercise of state police power

Police power

In United States constitutional law, police power is the capacity of the states to regulate behavior and enforce order within their territory for the betterment of the general welfare, morals, health, and safety of their inhabitants...

.

Background

In 1884, the legislature of Mississippi passed a statute which established a state commission with the power to impose transportation rates on private railroad companies. The companies had signed a charter contract with the state, authorizing them to set their own rates. The Farmers' Loan & Trust Company, a New York corporation, brought suit against the commission on behalf of Mobile & Ohio Railroad Company, to enjoin enforcement of the statute.

The Supreme Court's decision

In upholding the statute, the Court held that the state charter did not divest the state of the ultimate power to determine reasonable rates. In Stone v. Mississippi (1879), the Court had said that rate regulation fell outside of the state's police power. The potential contradiction with the earlier case was circumvented by strict construction of the charter contract:

The right to fix reasonable charges has been granted, but the power of declaring what shall be deemed reasonable has not been surrendered. If there had been an intention of surrendering this power, it would have been easy to say so. Not having said so, the conclusive presumption is there was no such intention.

The power to set a reasonable rate had been retained by the state and thus regulation did not impair the contract. However, the railroads in question were being built to cover an area from the Gulf of Mexico

Gulf of Mexico

The Gulf of Mexico is a partially landlocked ocean basin largely surrounded by the North American continent and the island of Cuba. It is bounded on the northeast, north and northwest by the Gulf Coast of the United States, on the southwest and south by Mexico, and on the southeast by Cuba. In...

 to the Midwest. The Court had held in Cooley v. Board of Wardens

Cooley v. Board of Wardens

Cooley v. Board of Wardens, 53 U.S. 299 , was a case in which the United States Supreme Court held that a Pennsylvania law requiring all ships entering or leaving Philadelphia to hire a local pilot did not violate the Commerce Clause of the Constitution. Those who did not comply with the law had...

(1852) that legislation which required national uniformity was reserved exclusively to Congress

United States Congress

The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....

. If viewed as regulation of interstate commerce, fixing of rates by the state would interfere with federal authority, even in the absence of congressional action. But here it was said that rate regulation permitted local variations:

It is not enough, to prevent the state from acting, that the road in Mississippi is used in aid of interstate commerce. Legislation of this kind, to be unconstitutional, must be such as will necessarily amount to or operate as a regulation of business without the state as well as within.

The Court had first held in Munn v. Illinois

Munn v. Illinois

Munn v. Illinois, 94 U.S. 113 , was a United States Supreme Court case dealing with corporate rates and agriculture. The Munn case allowed states to regulate certain businesses within their borders, including railroads, and is commonly regarded as a milestone in the growth of federal government...

(1877) that states could regulate businesses within their borders that were "clothed with a public interest". In a subsequent line of cases, state regulations of privately owned companies were repeatedly upheld. The decision in the Railroad Commission Cases further allowed for state legislatures to delegate their powers to administrative agencies

Government agency

A government or state agency is a permanent or semi-permanent organization in the machinery of government that is responsible for the oversight and administration of specific functions, such as an intelligence agency. There is a notable variety of agency types...

, such as railroad commissions.

Chief Justice

Chief Justice of the United States

The Chief Justice of the United States is the head of the United States federal court system and the chief judge of the Supreme Court of the United States. The Chief Justice is one of nine Supreme Court justices; the other eight are the Associate Justices of the Supreme Court of the United States...

 Morrison Waite

Morrison Waite

Morrison Remick Waite, nicknamed "Mott" was the seventh Chief Justice of the United States from 1874 to 1888.-Early life and education:...

, in the majority, contended that fixing of rates was permissible but warned that confiscatory rates would constitute impermissible expropriation:

From what has thus been said, it is not to be inferred that this power of limitation or regulation is itself without limit. This power to regulate is not a power to destroy, and limitation is not the equivalent of confiscation. Under pretense of regulating fares and freights, the state cannot require a railroad corporation to carry persons or property without reward; neither can it do that which in law amounts to a taking of private property for public use without just compensation or without due process of law.

Despite upholding the law, this dicta

Obiter dictum

Obiter dictum is Latin for a statement "said in passing". An obiter dictum is a remark or observation made by a judge that, although included in the body of the court's opinion, does not form a necessary part of the court's decision...

 intimated a shift in the Court's constitutional property jurisprudence. Waite's statement implicated that the due process clause of the Fourteenth Amendment

Fourteenth Amendment to the United States Constitution

The Fourteenth Amendment to the United States Constitution was adopted on July 9, 1868, as one of the Reconstruction Amendments.Its Citizenship Clause provides a broad definition of citizenship that overruled the Dred Scott v...

 protected even businesses affected with a public interest against confiscatory rate regulation. In Chicago, Milwaukee & St. Paul Railway Company v. Minnesota

Chicago, Milwaukee & St. Paul Railway Company v. Minnesota

Chicago, Milwaukee & St. Paul Railway Company v. Minnesota, 134 U.S. 418 , was a case in which the Supreme Court of the United States held that procedural due process limits state regulatory power over railroad rates. A regulatory agency in Minnesota had set railroad rates that the Minnesota...

(1890), the Court held that procedural due process limited state regulatory power over railroad rates.