LOUISVILLE AND N. R. Co. v. RAILROAD COMMISSION OF TENNESSEE. EAST TENNESSEE, V. AND G. R. Co. v. SAME.

(Advance Case, U. S. Circuit Court, M. D. Tennessee. February 29, 1884.)

Railroads having been created mainly for the accommodation of the public, and to facilitate the business of the country, and being indispensable to the rapid and cheap transportation of commodities, are subject to legislative control within the limits of State and federal constitutional restrictions, and may be required by law to refrain from so using their property as to injure others, and by appropriate pains and penalties may be restrained from unjust discrimination and extortionate charges, compelled to observe precautionary measures against accident, and in other ways regulated for the public welfare.

But the legislation adopted must observe the contract rights of corporations under their charters; must be confined to the exercise of the police power, and not interfere with the vested rights of the companies in their property or franchises; must not inflict punishment or take property otherwise than by due process of law nor without compensation; must not deny to them the equal protection of the law; and must in all respects observe the constitutional guaranties prescribed for the protection of all citizensrailroad companies being for such purposes as much citizens as natural persons.

The act of the general assembly of Tennessee of March 30, 1883, to establish a railroad commission analyzed, and held to be invalid because its provisions are too indefinite, vague, and uncertain to sustain a suit for the penalties imposed, and do not sufficiently define the offences therein declared. It leaves to the jury to say whether, upon the proof, the difference in rates amounted to discrimination, or whether the charges were unjust and unreasonable, thus making the guilt or innocence of the accused depend upon the finding of a jury, and not upon a construction of the act. It relegates the administration of the law to the unrestrained discretion of the jury, and there could be therefore no reasonable approximation to uniform results, but verdicts would be as variant as their prejudices, and inevitably lead to inequalities and injustice.

Neither is the objection to the act for uncertainty removed by its attempt to prescribe a standard of compensation for the guidance of the jury. It does not with precision point out the assessment for taxation which is to furnish the basis of judgment, nor prescribe the rule under which the net earnings are to be computed. But if these difficulties were overcome, there remains no method of measuring what is a "fair and just return" on the value of the property of the companies which they are allowed to earn before becoming liable to the penalties of the statute, but the act leaves it to the unqualified discretion of the jury, whose verdicts may vary not only as between different companies, but as between different suits with the same company. One jury may fix it at one rate per cent, and others at different rates, so that no company could tell whether it was violating the law or not, and the fact would be determined by the fluctuating contingencies of busi

ness, and a charge made on the calculation that 6 per cent would be fair, might, by the verdict of a jury, upon facts transpiring subsequent to the alleged violation, be pronounced unreasonable and unjust. The legislature cannot delegate such power to a jury without a practical confiscation of the citizen's property.

The act violates the eighth section of the eleventh article of the State constitution and the fourteenth amendment of the constitution of the United States. It discriminates against railroad corporations, in its third and thirteenth sections, by imposing upon them penalties in favor of the State, which are not imposed for like offenses or conduct upon other persons operating railroads in the State, although the act professes to regulate both. It also, in the twenty-ninth section, discriminates in favor of roads not completed, or the construction of which has not commenced, by exempting them from regulation and punishment for ten years. The act also reverses the presumption of innocence, and substitutes one of guilt, to be removed only by the accused proving innocence, and puts the power to raise this presumption in the hands of three commissioners, who can, by their act, place the burden on the accused, or leave it off, and arms them with authority to enfore their decree by imposing penalties, which may amount to the taking of private property without compensation. Besides, it enables a political party to bring to its aid the immense railroad property and influence, by action through the commissioners, which shall be friendly or unfriendly, as the railroad companies favor one party or the other.

The act of the Tennessee legislature, approved March 30, 1833, c. 199, entitled, "An act to provide for the regulation of railroad companies and persons operating railroads in this State, to prevent discrimination upon railroads in this State, and to provide for the punishment of the same, and to appoint a railroad commission," is invalid so far as it applies to the plaintiffs in these cases, because it is a regulation of inter-State commerce, acting directly, by a control of the rates of compensation, upon the transportation of persons and commodities in transit from one State into another. The States have surrendered the power to do this by the federal constitution, art. 1, § 8, which confers on Congress the exclusive power to "regulate commerce with foreign nations, and among the several States, and with the Indian tribes."

The power of the States to regulate railroad rates by such direct action is limited to domestic transportation, which means that carried on exclusively within the boundaries of a State, and transportation can be domestic only when it begins and ends within those boundaries; and this definition cannot, for the purpose of enlarging State authority, be held to include so much of a transportation on a continuous shipment between two or more States as will cover the distance travelled within the limits of any one of those States; for this construction would utterly destroy the exclusive power of Congress over the inter-State transportation, abrogate the constitutional provision, and enable the States to restrict, obstruct, or impair that freedom of commerce between the States which it was the object of the provision to permanently secure. It can only include the transportation carried on upon roads lying wholly within the State, or else it may be to shipments beginning and ending in the State, without reference to the character of the road in that regard. This is the utmost reach of State power, and, as to this, no decision is now made, because the act itself makes no discrimination, and attempts to control all rates.

Until Congress chooses to exercise whatever power it may have over domestic commerce, as above described, by reason of any relation it may bear to inter-State commerce as an auxiliary or instrumentality thereof, the States may continue their control over it as over any other such instrumentality within their territorial limits, although the inter-State commerce of

which it is an instrumentality may be indirectly or incidentally affected by such control, but they can never touch the inter-State commerce itself by direct action upon it or any part of it, by these regulations, and any State law, be it wise or unwise, valid or invalid in other respects, and no matter. what its character or the necessity for such a law may be, which acts upon the contract between the carrier and shipper for inter-State transportation to regulate the charges for it, or any part of it, or the conditions thereof in any respect, operates directly on the commerce itself, of which the transportation is certainly a part, and not on an instrumentality of it. These distinctions must be observed in legislation, and that which neglects or overlooks them, or assumes to disregard them, is necessarily invalid; and the courts cannot cure the defect by supplying through judicial decree the necessary qualifications to conform the legislation to constitutional limitations.

It is as imposible for a State to make a regulation of inter-State commerce by the exercise of its power over the corporations of its creation as by any other power, if it permits them to engage in inter-State commerce. Possibly, it may bind the corporations permitted to engage in inter-State commerce to schedules of rates agreed upon by them; but this is binding only by force of the contract of the carrier to be so bound, and not as a regulation of the rates under any municipal power of the States over the commerce. A regulation of inter-State commerce, as such, is as invalid in a charter as elsewhere in a State statute.

The Louisville & Nashville R. R. Co., being a Kentucky corporation, was authorized by license of the laws of Tennessee to extend its road into that state; and, subsequently, by laws passed for the purpose, to consolidate with other railroad companies, and thereby became an extensive system of intercommunication between the States from the Ohio river to the Gulf of Mexico. The East Tennessee, Virginia & Georgia R. R. Co., a Tennessee corporation, by authority of law, became a consolidated corporation, operating a system of railroads between the States and extending through Tennessee into Georgia, Alabama, and Mississippi, forming with its connections a united line of intercommunication, traversing North and South Carolina, Virginia, and other States. Held, that an act of the legislature which attempts to control the rates for fares and freights of persons and commodities passing over these roads from one State into another, on the theory of regulating the charges for the distances travelled within the State of Tennessee, is invalid as a regulation of inter-State commerce, and the railroad commissioners will be enjoined from executing it as to these roads.

APPLICATION for Preliminary Injunction.

The Louisville & Nashville R. R. Co. filed its bill alleging that it was a Kentucky corporation, extending its road into the State of Tennessee by authority of the laws of the latter State; that by other laws passed for the purpose it had been authorized to acquire and to consolidate with other roads extending into neighboring States; that by its charter, and the charters of the other roads so acquired by it, there were fixed certain maximum rates of charges for transportation, which conferred a contract right to establish its own rates within the maximum, which had not been exceeded by it. The East Tennessee, Virginia & Georgia R. R. Co., by its bill, alleged that it was a Tennessee corporation, authorized by law to consolidate its roads with others, and operating a system of roads extending into neighboring States, and that by its charter there were fixed certain maximum rates which conferred upon it