Charles River Bridge v. Warren Bridge (1837)
In 1785, Boston’s population was around 18,000; across the Charles River, Charlestown counted 1,200. Forty years later, Boston’s population had more than tripled, to 60,000; that of Charlestown to 8,000. The need to accommodate the increased travel and commerce between Boston and points inland resulted in protracted litigation before the Supreme Court in the 1830s in the Charles River Bridge v. Warren Bridge case.
Freed from their status as colonial economies by the War for Independence, many states initially sought to encourage economic development by granting monopoly licenses to entrepreneurs. The fortuitous contemporary emergence and rapid development of the modern business corporation as a means of accumulating capital facilitated that process. Protecting worthy investors against personal liability for losses and from potential free-riding imitators to maximize profits was seen as the best incentive for risk-taking and innovation. The Constitution incorporated this approach in Congress’s power to grant patents and copyrights.
Accordingly, in 1785, Massachusetts conveyed a license to build a bridge across the Charles River to the eponymous company. The grant was to run 40 years, later extended to 70 and, in the 1820s, to 100, years, with a right to collect tolls from the bridge’s users. Initially, matters went well, indeed. The investors, buoyed by the growth in population and traffic, eventually collected $30,000 in tolls annually, on an investment of $70,000.
However, as residents of Southern California know only too well, population growth and aging infrastructure create economic stresses and political pressure for change. Unlike the typical reaction of today’s politicians, the Massachusetts legislature in 1827 responded by approving a charter for the Warren Bridge Company to build a bridge across the Charles River. That bridge, to be located less than 300 yards from the existing Charles River Bridge, would charge tolls as a return on investment no longer than six years. Thereafter, the structure would revert to the state as a toll-free bridge.
The owners of the Charles River Bridge Company rightly saw this as a mortal danger to their enterprise and, in 1829, sued to enjoin the construction. They hired top-of-the-line legal talent in Massachusetts Senator Daniel Webster and soon-to-be chief justice of the Massachusetts Supreme Judicial Court, Lemuel Shaw. The state court, by evenly split opinion, rejected the challenge to the new charter, whereupon the plaintiffs appealed to the United States Supreme Court by writ of error. Arguments were heard in March, 1831. Four of the seven justices had been together more than 20 years, with only two appointed by the incumbent President, Andrew Jackson. The Court was unable to reach a decision, but permitted re-argument in 1833. Once more, the Court was unable to resolve the matter.
At that point, the “national republican” Marshall Court representing the America of the early 19th century gave way to the emerging “democratic” polity of the Jackson era. Justice William Johnson died in 1834, after 30 years on the Court. Justice Gabriel Duvall resigned five months later, after 23 years. Most significant, John Marshall died in 1835, having served 34 years as Chief Justice. This cascade allowed President Jackson to appoint three new justices, including his trusted political adjutant Roger B. Taney as chief. The Court once more heard arguments on the matter in early 1837 and, finally, upheld the legislature’s power to grant the new charter.
The Constitution’s framers had been alarmed by the lack of security in property during the early republican era. The abrogation by states of the vested rights of creditors through debtor relief legislation and the insecurity of business operations produced by legislative repeal of previously-authorized corporate charters were threats to social peace and economic development. Hence, the Constitution contained clauses intended to combat such “levelling.” Among them, Article I, Section 10, prohibited state laws “impairing the Obligation of Contracts.”
The Marshall Court had used that clause to limit legislative power in a series of decisions during the 1810s. In Fletcher v. Peck, for example, Marshall wrote that the usual power of a legislature to act free from any attempted restriction on its sovereignty by a predecessor did not apply when the predecessor’s action involved vested property rights. Included in such vested rights were those created by a grant from the state itself. Indeed, so fundamental was the protection of property rights that, even in the absence of a specific constitutional limitation, an attempt to revoke such a grant would violate “general principles common to our free institutions.” In concurrence, Justice William Johnson went further, declaring that such a revocation violated “the reason and nature of things: a principle which will impose laws even on the deity.” Whatever might be said about Johnson’s musing from a theological perspective, it certainly showed how vital even Jeffersonian republicans saw the protection of rights in property to the stability of free government.
In Dartmouth College v. Woodward, the Court extended the Contracts Clause to protect corporate charters against unilateral modification by legislatures. However, Justice Story noted in concurrence that a state was free to reserve such power to modify in the grant itself. When the plaintiffs in the Charles River Bridge case rested their constitutional argument on a violation of the Contracts Clause, Taney used Story’s reasoning to reject their claim. Moreover, in two other cases, the Marshall Court held that such grants should be protected only to the extent explicitly provided and should not reach rights and immunities only found by implication. At least as to the “great powers of the state” that were needed to act for the benefit of the community, there could be no alienation by mere implication. Taney also used those cases to hold that the Charles River Bridge Company’s charter had not expressly granted it monopoly status. A century-long monopoly status was not to be presumed over the legislature’s power to deal with changing conditions.
Taney’s opinion fit both Jacksonian Democrats and Jacksonian democracy. As the party of states’ rights, Democrats lauded Taney’s opinion as a model of legal reasoning that would revolutionize constitutional doctrine and promote independence of the states from the nationalizing tendencies of the Marshall Court’s jurisprudence. From that perspective, the opinion furthered Jacksonian democracy by allowing popular majorities represented in state legislatures to react to changing societal conditions by overriding entrenched corporate interests. After all, if a legislature could tie its successor’s hands, periodic elections were in vain.
Justice Story dissented, joined by Justice Smith Thompson. Not coincidentally, they were the only pre-Jackson justices on the Court and represented the old National Republicanism of Madison, Monroe, and Quincy Adams. Story saw the bridge charter as analogous to the private law established by two equal parties to a contract. The state wanted a bridge, and the company wanted to make a profit. The result was the freely negotiated grant in its particulars. Had the investors known that the state unilaterally could destroy that grant by another, they would never have undertaken their risky venture under the fixed terms.
Taney rejected this “private contract” approach and its “vested rights” framework. Instead, he saw a corporate charter as analogous to a royal grant, a franchise or privilege bestowed by the sovereign who could not be deprived of his inherent powers by that grant.
It was precisely that conception which alarmed Story. To him, Taney postulated a relationship of ruler and subject, not of free equals, between a legislator and a constituent. Taney substituted expediency and pragmatism for republican morality and the rule of law as the constitutional essence. This resulted in private rights existing only at the pleasure of a popular majority in the legislature and undermined the security in property that was crucial to economic development. Legislatures were not monarchs. The people might be sovereign, but the legislative power was limited.
The decision’s importance lay less in the particular result or in producing revolutionary constitutional doctrine than in how it acquiesced in the settlement of what had emerged as conflicting pulls on the economy and political structure of the United States. In economics, the emerging era of competition and innovation manifested in commerce and manufacture clashed with the received doctrine of protecting vested rights that viewed property as having the longevity and permanence of land. The earlier protection of vested property rights to encourage innovation had come to be viewed as anachronistic, at best, and, more likely, as inimical to progress. The monopolies that had made earlier generations wealthy now stood in the way of the younger entrepreneurs’ and inventors’ path to fortune. New technologies were replacing older ones, just as the Charles River Bridge in 1785 had supplanted the grant given to Harvard University in 1650 to operate a ferry service across that river. A decision against the Warren Bridge Company’s new charter would have doomed not only the construction of new bridges in competition with other bridge monopolies. More significantly, it would have set back the emerging railroads in their bids to compete with chartered canal and turnpike monopolies.
In its political sense, the opinion reflected the emergence of a more assertive demos who would use their numbers to promote their interests, for better or worse, against the rights-based claims of a property-owning Whig elite. Still, contrary to the fears of Story and the hopes of the more radical elements among the Jacksonians, in the end the generally pro-business Taney Court did not revolutionize the Marshall Court’s Contracts Clause jurisprudence. Story’s dissent in the Charles River Bridge case may have been more satisfying intellectually and better-grounded jurisprudentially. Story’s warnings may have foretold the dangers to rights in property and to the rule of law posed by modern legislative majorities. Taney, however, captured the spirit of the time, a free-wheeling and innovative era of technological change and economic advancement relatively unrestrained by regulation.
Charles River Bridge v. Warren Bridge (1837) Supreme Court decision:
An expert on constitutional law, and member of the Southwestern Law School faculty, Professor Joerg W. Knipprath has been interviewed by print and broadcast media on a number of related topics ranging from recent U.S. Supreme Court decisions to presidential succession. He has written opinion pieces and articles on business and securities law as well as constitutional issues, and has focused his more recent research on the effect of judicial review on the evolution of constitutional law. He has also spoken on business law and contemporary constitutional issues before professional and community forums, and serves as a Constituting America Fellow. Read more from Professor Knipprath at: http://www.tokenconservative.com/.
Today we seem to be further down the path to “ruler” and “subject” than we were 200 years ago. Our politicians want to prove their worth by authoring legislation and voting close to 100% of the time. If they are not “doing something” in DC, they are replaced with a more active legislator. As Madison said, our laws now are “so voluminous that they cannot be read, or so incoherent that they cannot be understood.” This has led to Pelosi saying, “we have to pass the law to know what’s in it.” Control over what and how businesses operate is less controlled by contract among private parties and more controlled by the national rules one must follow while engaged in business.
Increased levels of mergers and acquisitions are a good indicator of how bad the problem has become. Only extremely large companies can afford to hire the number of employees who do nothing but insure compliance with federal rules and regulations. It’s getting too administratively expensive to be an independent businessman or even doctor anymore.
Very interesting case. The conflicting arguments, purposes, implications is fascinating.