Evening star., 1939-04-19

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Supreme Court.
Charles G. Ross. The notab1e
opinion of Justice Stone attacking
the views of the majority in the
A. A. A. case was another example.
Still another, of continuing i'm
portance, was the separate concur
renee by former Justice Brandeis
Coined by Holiness in the court s
decision in the memorable South
western Bell Telephone rate case in
1923.
1t was in that case that the ma
jority of the court found in the
ancient rule of Smyth VS.. Ames a
reason for knocking out telephone
rate reduction ordered by the Public
Service Commission of Missouri.
The court held that the commission
had not given due weight, as re-
quired by Smyth VS.. Ames, to the
replacement cost of the telephone
companys properties. Justices
Brandeis and Holmes concurred IN
the result, but not in the reasoning
by which it was reached.
Frankfurter Retorts.
Again in 1929, Smyth VS.. Ames
reached out of the dusty tones of
Supreme Court rulings to demoIsh
the valuation formula applied by
the Interstate Commerce Commits
sion in the famous OFallon case.
Again the court held that the regu-
latory commission had not taken
proper account of what it would
cost to reproduce the properties in
question-this time the railroads of
the United States. Justice Brandeis
gave a dissenting opinion in which
he was joined by Justices Holmes
and Stone. Again he invoked the
"brooding spirit of the law" against
Smyth VS.. Ames.
Smyth VS.. Ames bobbed up again
last Monday in a Pennsylvania util-
ity rate case. 1t did not control
the decision of the court, which
went against the Edison Light &
Power Co., but it was cited in the
courts opinion as being the "classi-
CAL doctrine on the rate-making
subject. Justice Reed read the
opinion. Though there was no dis
sent from the result. the reasoning
of Justice Reed provoked sharp
retort from Justice Frankurter. who
was supported by Justice Black.
War in the Court.
Taking up the role Of Justice
Brandeis, the former Harvard pro-
fessor trained his guns on Smytl
VS.. Ames in a way that left no doubt
he will carry on the long fight for
reversal. His opinion is noteworthy,
too, as an example of the utter
frankness with which the war of
contending economic PHILOSOPHERS on
the court is now being carried on.
No pulling of punches on either
side was discernible in the sheaf OF
decisions that came down Monday.
These decisions. incidentally, with
the accompanying dissents and sep
arate concurrences, show with great
clarity the present cleavage on the
court on large economic issues. Not
long ago in the majority, Justice
McReynolds and Butler today stand
isolated
To return to Snyth VS.. Ames. The
curious and ironic fact that the
cost-of Reproduction theory which
forms an essential part of Smyth VS..
Ames was first brought forward by
William Jennings Bryan in an ef-
fort to beat down railroad rates.
The railroads had been built at in
f1ated prices: Bryan contended that
rates ought to be based not on the
original cost of the roads. but on
what it would cost to reproduce
them. With the rise in commodity
costs during and after the war, the
theory which Bryan had urged in
the public interest began to cut the
other way. 1t was now the rail-
roads and the other utilities that
wanted their properties. for rate
making purposes, valued according
to what it would cost to rebuild
them.
Would Work as a Paradox.
The magnitude of the issue was
illustrated in the OFallon case,
where it was shown that If the re-
production theory were given full
force and effect, the value Of the
railroads Gas of 1920 would be more
than doubled. or as Justice Stone
said, they would have value Of 40
billion dollars and we would arrive
at the economic paradox that the
present value of the railroads is far
in excess Of any amount on which
they could earn return"
Smyth VS.. Ames. and the decisions
Of the Supreme Court which have
stemmed from it, enumerate various
factors to which due consideration
must be given in the fixing of utility
values for rate-making purposes.
The decisions do not-of course they
cannot-fix the exact weight which
factors. Hence the endless con-
fusion into which the whole business
Of rate making has been plunged
by judicial formula, or the lack Of
it.
Smyth VS.. Ames Useless"
Justice Frankfurter states patent
fact when he says, quoting an opin-
ion Of Justice Bradley of so years
ago, that the underlying issue is
| whether the ultimate arbiters Of
utility rates should be the courts,
or commissions and legislatures.
However that issue ought to be
resolved, the fact seems clear, as
the justice says, that the "mori-
bund" formula of Smyth VS.. Ames is
useless as guide for adjudication"
under present conditions. Various
| States. as he further pOirts ont.
are seeking by other devices to find
fair means of accommodating pub
lie and private interests"
Even in the opinion to which
Justice Frankfurter objects, because
1t appears to give new vitality" to
Smyth VS.. Ames, the doctrine Is not
clothed with the authority that it
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