The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1898-03-08
The Nebraska Rate Case.

l. lie ueCISlOH Oh the supreme court Ol
the United States handed down yester-
day. in what has been called the Ne
braska rate case. is one of the most
important of recent years. Most of the
general rules relative to the regulation
of railroad freight rates have now been
fairly we'll established by the courts.
1t has still remained a somewhat I'M
decided question how far a state legis-
lature could go in dealing with traffic
beginning and ending wholly within
the state. ard what power OF review and
veto the supreme court would assert
and exercise in case such legislation
appeared to it to be in violation of
equity. Many states have passed bills
touching on this issue, and many state
supreme courts have held acts valid Or
invalid according to the temper of the
Judiciary and the terms of the acts. We
have now the opinion of the federal
court on the general subject; and it will
decide the fate of many cases now
pending, and govern and determine to
considerable extent the actions OF
state legislatures hereafter.
The state of Nebraska passed in 1893,
an act prescribing maximum rates for
the carriage Of freight on railroads
within the state. These rates were de-
clared by the companies to be ruinously
low; so much so that, if put into effect,
they would amount to the conf1scation
of large amount Of railway property.
The railroads applied to the courts, de-
claring that the act deprived the car
riers of property without due process
OF law: while the state held that. in
case of business originating and ending
within the state, the federal courts had
no jurisdiction. Virtually the single
question at issue was this: Can a state
legislature fix maximum rates on pure
1y state traffic without regard to their
reasonableness and without the federal
courts having power to interfere. With
this are bound up many interesting side
issues, such as the factors entering into
reasonable rate, and the separation
between state and interstate business
in reaching 1t. The fe deral circuit court
decided in favor of the railroads, and
the supreme court has affirmed the de-
cision.
At the outset, three principles are de-
clared by the court to be settled. A
person" within the language of the
fourteenth amendment to the constitu-
ton, may be corporation. A rate pre-
scribed by law which does not permit
the carrier to earn fair compensation
is equivalent to taking property with
out due process of law. Rates for car
rying freight within state cannot be
determined so conclusively by the legis-
lature that their reasonableness may
not be inquired into by the
federal courts. These fundamen-
tai propositions having been es-
tablished, the court proceeds to
apply them to the case in question, and
sets aside the law as invalid 1t says
that, in testing the reasonableness Of
u rate. under state legislation, this
must be determined by the earnings on
state traffic. without reference to re-
ceipts from interstate business. Neither
should be made an excuse for in
ticting unlawful losses or grasping I'M
lawful gains through the other. AS to
the much mooted definition of reason
able charges" the court observes great
latitude. Going beyond the rule laid
down in this state. and having regard
to the cost of reproducing the property,
it's decision includes the following
broad statement: The original cost of
construction, the amount expended in
permanent improvements, the amount
and market value of its bonds and
stock, the present as compared with
the original cost of construction, the
probable earning capacity Of the prop
erty under any rates prescribed by
Stot 70 70 70
Cperati expenses are all matters for
considera ton. and to be given such
weight as may be just and right in the
particular case"
The great rule of equity for both
parties, about which the discussion and
the litigation of the last twenty-five
years has ragged, stands forth clearly.
The railroad has a right to a fair re-
turn on the value of its property en-
ployed in the public service The pub
lie has a right to such service at rates
no higher than will produce this fair
return. Judged by this, the Nebraska
statute, under the showing of facts
made by the companies is declared
inequitable, and. as a taking Of prop
erty without due process of law, I'M
constitutional. The application Of a
given schedule thus becomes a matter
to be determined by the circumstances
of the case; and, if those so change that
what was before just becomes unjust,
then relief may be obtained from the
courts on such a showing. The decis-
ion, consequently appears to follow
lines of extreme fairness and to assert
the power and determination of the
court to do justice between the rail-
roads and the public as represented by
legislatures. The latter will not be
permitted to confiscate the property of
the former by compelling them to do
business at rates which involve a loss
or at least will produce no adequate
return for capital invested and labor
expended; while the former will not
be permitted to Cypress the latter by
eXacting eXtortionate rates. Whether
this is OF is not done in any particular
case is a question of fact, to be decided
| by the weight Of the evidence. The
| Nebraska law is set aside because it's
terms are unreasonable and unjust.
| The determination Of the supreme
court that it has the power and the
| disposition to deal with this vast cues
ton, and the principles of equity
which it announces as governing its
action, are the important features of
| the decision.
An Extraordinary Operation.
We commented, at the beginning of