HARVARD LAW REVIEW VOL. XXXII FEBRUARY, 1919 No. 4 STATE POWER OVER INTRASTATE RAILROAD RATES DURING FEDERAL CONTROL T is not proposed to discuss in this article the constitutional warrant for congressional legislation regulating intrastate railroad rates. The Federal Control Act1 has been passed in the exercise of the war power and it is difficult to discover any substance in the suggestion that legislation under this power meets an insuperable barrier when it confronts intrastate rates. Since Congress may regulate intrastate railroad rates when this is necessary to the proper regulation of commerce among the states 2 it is clearly justified in regulating these same rates when to do so enables it the more effectually to carry out another of the great powers expressly conferred upon it by the Constitution. That the war power is of sufficient scope to enable Congress to take over the transportation systems of the country is manifest; and since the effective operation of these systems requires that the government shall control all transportation thereon, and not merely the transportation of men and materials needed primarily for war purposes, it follows that the government must charge for the service rendered; and the conclusion is inescapable that it is entitled to determine for itself what that charge shall be. For it is elemen 1 Act of Congress of March 21, 1918. 2 Houston East & West Texas Ry. Co. v. United States, 234 U. S. 342 (1914); American Express Co. v. Caldwell, 244 U. S. 617 (1917); Illinois Central R. R. v. Illinois, 245 U. S. 493 (1918); Henry Wolf Biklé, "Federal Control of Intrastate Railroad Rates," 63 UNIV. OF PENN. L. REV. 69. tary that the federal government in the exercise of its powers is not dependent upon, nor obliged to defer to, state authority.3 But in certain instances the United States may, under the Constitution, permit the continued operation of state authority even in a field which the national government is entitled to occupy and in which it has exerted its activity. Familiar instances of this class of cases are found in the permitted taxation by the states of national banks and railroads incorporated by Congress.4 Passing, therefore, the constitutional aspect of the matter since this seems too clear to require extended discussion - this article will be confined to an examination of the question whether the Federal Control Act has deprived the states of such power as otherwise they might have had to continue the regulation of intrastate railroad rates, or, while establishing federal possession and operation of the railroads, has permitted the continued exercise of state authority in connection with such rates. The answer to this question is to be found, it is believed, in sections 10 and 15 of the Federal Control Act, the text of which is printed in the margin.5 At the outset it is to be noted that the 'M'Culloch v. Maryland, 4 Wheat. (U. S.) 316, 424 (1819); Ex parte Siebold, 100 U. S. 371 (1879). In re Debs, 158 U. S. 564, 578 (1895). ♦ See, for example, Van Allen v. Assessors, 3 Wall. (U. S.) 573 (1865); Railroad Co. v. Peniston, 18 Wall. (U. S.) 5 (1873). 5 "Sec. 10. That carriers while under Federal control shall be subject to all laws and liabilities as common carriers, whether arising under State or Federal laws or at common law, except in so far as may be inconsistent with the provisions of this act or any other act applicable to such Federal control or with any order of the President. Actions at law or suits in equity may be brought by and against such carriers and judgments rendered as now provided by law; and in any action at law or suit in equity against the carrier, no defense shall be made thereto upon the ground that the carrier is an instrumentality or agency of the Federal Government. Nor shall any such carrier be entitled to have transferred to a Federal court any action heretofore or hereafter instituted by or against it, which action was not so transferable prior to the Federal control of such carrier; and any action which has heretofore been so transferred because of such Federal control or of any act of Congress or official order or proclamation relating thereto shall upon motion of either party be retransferred to the court in which it was originally instituted. But no process, mesne or final, shall be levied against any property under such Federal control. "That during the period of Federal control, whenever in his opinion the public interest requires, the President may initiate rates, fares, charges, classifications, regulations, and practices by filing the same with the Interstate Commerce Commission, which said rates, fares, charges, classifications, regulations, and practices shall not be suspended by the commission pending final determination. "Said rates, fares, charges, classifications, regulations, and practices shall be rea President is authorized to initiate rates, and it necessarily follows that the question of state power may arise either with respect to rates so initiated or with respect to rates which have been left unchanged by the Railroad Administration. But the DirectorGeneral of Railroads, by his General Order No. 28,6 advanced substantially all transportation rates and fares of railroads under federal control, so that the important issue from the practical viewpoint is as to the power of the states to control rates initiated by the President. And consideration will first be given to this question. It is to be noted first, that the authority devolved upon the President to initiate rates is not restricted by the terms of the act to interstate rates; in fact, there is no reason why it should be so restricted. The act is passed, not under the power to regulate commerce, but under the war power, and if it is desirable that the President initiate rates an obvious necessity be suggested which makes the exertion of this power less necessary no reason can sonable and just and shall take effect at such time and upon such notice as he may direct, but the Interstate Commerce Commission shall, upon complaint, enter upon a hearing concerning the justness and reasonableness of so much of any order of the President as establishes or changes any rate, fare, charge, classification, regulation, or practice of any carrier under Federal control, and may consider all the facts and circumstances existing at the time of the making of the same. In determining any question concerning any such rates, fares, charges, classifications, regulations, or practices or changes therein, the Interstate Commerce Commission shall give due consideration to the fact that the transportation systems are being operated under a unified and coördinated national control and not in competition. "After full hearing the commission may make such findings and orders as are authorized by the act to regulate commerce as amended, and said findings and orders shall be enforced as provided in said act: Provided, however, That when the President shall find and certify to the Interstate Commerce Commission that in order to defray the expenses of Federal control and operation fairly chargeable to railway operating expenses, and also to pay railway tax accruals other than war taxes, net rents for joint facilities and equipment, and compensation to the carriers, operating as a unit, it is necessary to increase the railway operating revenues, the Interstate Commerce Commission in determining the justness and reasonableness of any rate, fare, charge, classification, regulation, or practice shall take into consideration said finding and certificate by the President, together with such recommendations as he may make." "Sec. 15. That nothing in this act shall be construed to amend, repeal, impair, or affect the existing laws or powers of the States in relation to taxation or the lawful police regulations of the several States, except wherein such laws, powers, or regulations may affect the transportation of troops, war materials, Government supplies, or the issue of stocks and bonds." • Issued under date of May 25, 1918. in the case of intrastate movements than in the case of those which are interstate. A certain degree of confusion of thought seems to be engendered by the affirmative grant to Congress of the power to regulate commerce among the states, and the resulting habit of mind to attribute control over intrastate commerce to the states. But assume for the moment that the Constitution contained no grant of power to Congress with respect to commerce. Clearly, it would nevertheless be able, under the war power, to do just what it has done with respect to the transportation systems of the country. And from what source then would be derived the contention that the federal power is restricted to dealing with interstate rates? In any event, the President is authorized in section 10, "whenever in his opinion the public interest requires," to "initiate rates, fares, charges, classifications, regulations, and practices," and this power, granted without qualification or limitation, cannot be restricted by the courts to the field of interstate commerce. 8 This proposition is amply supported by the authorities." In the Trade-Mark cases, the court, dealing with the general language of the act of Congress there under consideration, said: "It has been suggested that if Congress has power to regulate trademarks used in commerce with foreign nations and among the several States, these statutes shall be held valid in that class of cases, if no further. To this there are two objections: First, the indictments in these cases do not show that the trade-marks which are wrongfully used were trade-marks used in that kind of commerce. Secondly, while it may be true that when one part of a statute is valid and constitutional, and another part is unconstitutional and void, the court may enforce the valid part where they are distinctly separable so that each can stand alone, it is not within the judicial province to give to the words used by Congress a narrower meaning than they are manifestly intended to bear in order that crimes may be punished which are not described in language that brings them within the constitutional power of that body." And it is highly significant that in the three cases cited in the note the Supreme Court refused to limit the general language 7 United States v. Reese, 92 U. S. 214, 220-21 (1875); Trade-Mark Cases, 100 U. S. 82, 98 (1880); Employers' Liability Cases, 207 U. S. 463, 500-01 (1908). used by Congress even to save the legislation. In view of the well-settled rule to interpret legislation so as, if possible, to enable it to stand the test of conformity with the Constitution, it is clearly proper, a fortiori, to give general language its natural meaning when the constitutionality of the statute is not at stake. And, as has been pointed out, there is no constitutional reason for limiting the power of the President to interstate rates, since he is here acting under the war power which knows no such limitation. Furthermore, there is abundant reason, from the practical standpoint, for giving this general language its natural meaning, since the President could not effectively or justly exercise the ratemaking power with respect to interstate rates if he were without power to deal also with intrastate rates. Apart from the discrimination which would result, there would be innumerable instances. where the intrastate movement constituted a movement of the utmost consequence to the military situation. In addition, it is of no little consequence that the President, through the Director-General, has assumed to initiate intrastate rates, as well as interstate rates. Under the well-settled rule, the action of the executive department is entitled to great respect from the judiciary. And, though it may not be possible to cite authorities to the point, it is not without significance that the entire country has acquiesced in the interpretation of the act adopted by the executive. There being, therefore, no sufficient ground for doubting the President's authority to initiate rates, etc., the question arises whether, under the present act, rates, etc., so initiated are subject to the control of the states through the medium of their various regulating bodies. Before proceeding to a consideration of this question it should be noted that the government is not operating the railroads under federal control through the medium of their corporation owners but directly and in the name of the Director-General. Bills of lading, passenger tickets, and other transportation contracts are issued in his name; the wages of employees are fixed and paid directly by him and his representatives; and actions at law and suits in equity must be brought against him and not otherwise.10 9 Logan v. Davis, 233 U. S. 613, 627 (1914), and cases there cited. |