Chicago, Milwaukee and St, Paul Railroad v. Minnesota, 134 U.S. 418 (1890) became a landmark case in establishing a new direction for government regulation of business, though that new direction gave way to the coming of the New Deal. Prior to the Chicago, Milwaukee decision, courts had pretty much deferred to legislatures in deciding whether legislation passed constitutional muster. For the most part, courts would not inject themselves into controversies regarding the legislative regulation of business. This changed with the Chicago, Milwaukee decision.
This change began to take shape in June 1887, when the Minnesota legislature established a state Railroad and Warehouse Commission to regulate the rates that railroads could charge for carrying and storing freight. The Commission had three members appointed by the Governor and confirmed by the Senate, and it was given the final authority over the rates that railroads and associated enterprises could charge. Accordingly, it was impossible to complain about Commission decisions except by complaining to the Commission.
All the same, a long-standing piece of Constitutional wisdom asserts that no person should be a judge in his or her own cause. This wisdom is the basis of our Constitution’s division and separation of political power among multiple branches of government and between states and the federal government. While there are strong grounds for thinking that the original constitutional vision of separating and dividing political power has frayed over the duration of the Republic, the wisdom of separating and dividing power surely remains as valid as it ever was.
The Chicago, Milwaukee, and St. Paul Railroad had been charging 2.5 cents per gallon to carry milk along some of its routes and 3 cents to carry milk along other routes. The Commission ruled that the Railroad must charge 2.5 cents along all its routes. When the Railroad refused to do this, the state asked the Minnesota Supreme Court to direct the Railroad to comply with the Commission’s demand, which the Court did.
At this point, the Railroad challenged the constitutionality of the Minnesota Court’s ruling, arguing that the regulation violated the due process clause of the 14th Amendment. In April 1888, the Minnesota Supreme Court upheld its ruling in favor of the Commission over the Railroad. When the Minnesota Supreme Court denied the Railroad’s request that the Court reconsider its ruling, the Railroad brought the case to the U. S. Supreme Court in January 1890.
On March 24, 1890, the Court ruled in favor of the Railroad. With this decision, state legislatures lost their power to have the final word regarding the regulation of business. A state legislature could no longer create a Commission to regulate business, and declare that the Commission’s judgment was the final word in the matter. Such regulations were now subject to third-party review.
It’s easy enough to understand why legislatures might want to exempt their actions from judicial review. Who wouldn’t want to have that power? It’s also easy enough to understand why the American Constitution established a system of separated and divided powers. The Founders recognized that any group of people might pursue their interests at the expense of other people. People were not exempt from this capacity simply because they held political office; indeed, holding such office could well increase that capacity. The only remedy for this feature of human nature was to separate and divide political power so that the use of such power requires concurrence among different political bodies.
The decision in Chicago, Milwaukee represented some recapturing of the Founder’s constitutional wisdom, though perhaps representing only an incomplete recapturing. Due process is generally thought to be an antidote to the arbitrary exercise of power by some political official. It might be, though it need not be. Even in the presence of some procedure that conforms to popular images of due process, regulation can serve as an instrument through which politically dominant interests can impose their desires on other portions of society. For instance, it’s surely notable that the Commission required the railroad to reduce its 3-cent rate to 2.5 cents when it could alternatively had required the railroad to increase its lower rate to 3 cents.
Due process reflects the wisdom that no person should be able to serve as a judge in his or her own cause. Had the Minnesota legislature established some appeal to some alternative authority, the due process requirement might well have been met. Yet the railroad commission and this alternative, judicial-like body might both have been comprised of opponents to the commercial interests of railroads, in relation to the pro-farmer or Granger interests that were strongly in play at the time.
In other words, the entity to which the appeal is lodged could be a close cousin in its values to the entity that issued the regulation, in which case a due process requirement might have little bite to it. Our Constitutional Founders recognized that the possession of political power was likely to bring out the worst in people, while recognizing all the same that such power and its use was necessary for well-working societies. Chicago, Minnesota gave some though perhaps incomplete recognition to this two-sided nature of political power.
Chicago, Milwaukee, and St. Paul Railroad v. Minnesota (1890 Supreme Court decision: https://supreme.justia.com/cases/federal/us/134/418/
Richard E. Wagner is Holbert Harris Professor of Economics at George Mason University.