Smyth v. Ames

Smyth v. Ames

Submitted May 9, 1898
Decided May 31, 1898
Full case name Smyth, Attorney General, et al. v. Ames, et al.; Smyth, Attorney General, et al. v. Smith, et al.; Smyth, Attorney General, et al. v. Higginson, et al.
Citations

171 U.S. 361 (more)

18 S. Ct. 888; 43 L. Ed. 197; 1898 U.S. LEXIS 1608
Subsequent history Federal Power Commission v. Hope Natural Gas Co.
Holding
Voided Nebraska railroad tariffs and defined the constitutional limits of governmental power to set railroad and utility rates.
Court membership
Chief Justice
Melville Fuller
Case opinions
Majority Harlan
Laws applied
Fourteenth Amendment to the United States Constitution, Contract Clause

Smyth v. Ames, 171 U.S. 361 (1898), also called The Maximum Freight Case, was an 1898 United States Supreme Court case.[1] The Supreme Court voided a Nebraska railroad tariff law, declaring that it violated the Fourteenth Amendment to the United States Constitution in that it takes property without the due process of law.[2] The Court defined the constitutional limits of governmental power to set railroad and utility rates by stating that regulated industries have the right to a "fair return". The ruling was later overturned in Federal Power Commission v. Hope Natural Gas Co.[3]

The decision was unanimous and the majority opinion was written by Justice John M. Harlan.

Prior history

On April 12, 1893,[4] Nebraska passed a law, a so-called "maximum rate bill", establishing maximum rates for the transportation of freights within the state.[2] The Railroad Commissioners of Nebraska were empowered to reduce any freight rate.[4]

Several precedents had been set by the Supreme Court regarding state control over railways. Until Munn v. Illinois when the Granger Laws were declared constitutional, it had been held that railway property was protected from state authority by the Contract Clause of the Constitution, which states that no state shall pass any "Law impairing the Obligation of Contracts". However, in the Munn case, the Court ruled that all property was held subject to legislative regulation if it was "affected with a public interest". Further decisions built off the Munn decision, specifying that while the legislature may regulate property "affected by the public interest", they must exercise it reasonably by applying the used and useful principle, so as to not deprive citizens of their property without due process of law.[5]

Case

The maximum rate law was contested by the Union Pacific, St. Joseph and Grand Island Railway, Omaha and Republican Valley Railway, and the Kansas City and Omaha Railway. They claimed the law was confiscation, and therefore unconstitutional.[4] They said the law would make a difference of $2,250,00 annually.[6]

The Supreme Court unanimously found the law unconstitutional. The court found that it is not enough to show a tariff – even if the tax is in the public interest – still leaves a company enough money to pay operating expenses and stock dividends.[7]

Effects of the decision

Businessmen were pleased by the decision, and believed it would give stability to railroad investments.[8] Others were unhappy.[9]

The Interstate Commerce Commission was weakened by the Court's decision.[10]

Subsequent history

The ruling was overturned in Federal Power Commission v. Hope Natural Gas Co.[3]

References

  1. ↑ 171 U.S. 361 (1898)
  2. 1 2 Public Opinion: A Comprehensive Summary of the Press Throughout the World on All Important Current Topics. Public Opinion Co. (Princeton University). 1898. p. 330.
  3. 1 2 Siegel, Stephen A. Smyth v. Ames. Answers.com. Accessed 18 February 2009
  4. 1 2 3 "Nebraska Law Invalid" (PDF). NYT. 8 March 1898. Retrieved 18 February 2009.
  5. ↑ "The central law journal". The Central Law Journal. St. Louis, MO: Soule, Thomas & Wentworth. 46 (24): 489. 10 June 1898. Retrieved 18 February 2009.
  6. ↑ The International Year Book. 1899. p. 545.
  7. ↑ The Nation. J.H. Richards. 1898. p. 261.
  8. ↑ "Maximum Rate Decision" (PDF). NYT. 9 March 1898. Retrieved 18 February 2009.
  9. ↑ Shaw, Albert (1898). Review of Reviews and World's Work: An International Magazine. The Review of Reviews Corporation,. p. 402.
  10. ↑ Myers, Gustavus (1912). History of the Supreme Court of the United States. C. H. Kerr. p. 637.
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