Guest Essayist: Joerg Knipprath

At the Peace of Paris that ended the Revolutionary War, the United States (defined, as in the Declaration of Independence, as the individual states) were recognized by the British as free and independent. While the British relinquished to those United States territory from the Atlantic to the Mississippi, the several states did not thereby relinquish their own, sometimes conflicting, claims to that land. The Articles of Confederation provided procedures for the settlement of boundary disputes between states under the aegis of Congress and also anticipated that there might be disputes between grantees of land from two different states. Yet, no state was to be deprived of land for the benefit of the United States, so the Confederation Congress could not force the states to cede their western land. Still, a number of states released their claims, so that Congress gained de facto control over those lands and organized the Old Northwest under the Northwest Ordinance of 1787.

That ceding of land continued under the new Constitution of 1787. However, some states lagged. Pressure had built since the War to open western lands to settlement. Individuals setting out to make a living, and populations in the settled portions of the original states who wanted pacification of the frontier and protection against Indian raids, supported this expansion. Hence, states along the Atlantic coast made grants of their western public lands to potential settlers. One such example was the epic-like tale of the Yazoo River lands in the Old Southwest.

In 1789, Georgia sold 16 million acres of western land to land companies, one of which was headed by Patrick Henry. The purchasers tried to pay by tendering Georgia’s own Revolutionary War-era scrip, a practice that speculators successfully employed in some other states. When Georgia refused the tender and demanded gold and silver, the deal collapsed. The companies eventually sued in federal court to compel the sale. One case, by a South Carolina plaintiff, reached the Supreme Court. In Chisholm v. Georgia, the Court held the state amenable to suit in federal court. That decision precipitated an immediate and violent (both literally and figuratively) reaction by Georgia and brought about, in record time, the adoption of the Eleventh Amendment to the Constitution to prohibit such suits.

The legislature then granted 35 million acres of Yazoo River lands to four companies in 1795. The Yazoo territory was claimed by Georgia and encompassed most of the current states of Alabama and Mississippi. It was lauded in The American Gazetteer in 1797 as a “healthy, fertile, and pleasant country” with a “luxuriancy and diversity of its soil” and “remarkably well watered by springs and brooks.”

Such an attractive area might produce a handsome price for the treasury, but the legislature sold the entire territory for $500,000 (about 1.5 cents per acre) in gold and silver. All but one of the legislators had been bribed by the companies. One member was “criticized” for selling his vote for $600, while the going price appeared to be $1000. He replied that “it showed he was easily satisfied and not greedy.” Following considerable turmoil, at the next election the aroused voters chose an almost entirely new legislature. That body swiftly repealed the tainted grant and purported to void any rights under it.

Of course, the original land companies were not content to sit on their purchases. It is difficult today to grasp the scope and prevalence of land speculation by people of great and moderate means. The United States was rich in land and poor in every other respect. The hope for future profits lay in easy immigration by those who would need land to settle. There was, then, a ready market for rights to those lands. Moreover, if there were unclean hands in the original grant, best to sell to innocent purchasers whose claims would be harder to undo. Thus, the companies, which included numerous politicians, judges, and prominent members of society, sold rights to millions of acres to smaller investment syndicates that also included numerous politicians, judges, and prominent (and more middling) members of society.

One such sale, in 1796, was of 11 million acres at 10 cents per acre by the Georgia Mississippi Company to the New England Mississippi Land Company. Among the investors in the latter was John Peck of Boston. He sold a Yazoo parcel to Robert Fletcher of New Hampshire. Invoking their diversity of state citizenship, Fletcher sued Peck in 1803 in federal court for failure to convey proper title due to Georgia’s repeal act.

The plot now thickens even more. Both Fletcher and Peck owned stock in the New England company, which may or may not have been involved in the bribery of the Georgia legislature. The transaction between it and the Georgia Mississippi Company was complex. That opacity suggested to commentators at least some knowledge of the transaction’s questionable circumstances. There was no evidence that the two individual litigants were involved in the bribery; however, there was much evidence that they knew about it at the time of their “contract.”

It is difficult to know the players without a scorecard in this case. The original companies and the various subsequent purchasers—including both Fletcher and Peck–wanted to have the courts resolve the constitutionality of Georgia’s repeal and to remove the cloud hanging over their land titles. A victory for Peck, the defendant, would uphold the original 1795 grant and confirm title in the companies who had bribed the legislature. It would also mean that the 1796 repeal act by the new Georgia legislature was invalid, as was any subsequent sale by that legislature. To test his title, Fletcher, the nominal plaintiff, argued on behalf of the new legislature that the original grant was void due to bribery, and that the new legislature could not be bound by it. In reality, however, Fletcher personally would win only by losing. His loss would clear his title, and he could keep the land that he had “bought” from his fellow-investor Peck. Both parties, then, needed Fletcher to lose.

Since the Eleventh Amendment prevented suit in federal court against Georgia, and since the repeal statute also forbade the Georgia courts from hearing Yazoo cases, Fletcher’s suit against Peck was the only way to get judicial review of the matter. However, their apparent collusion raised doubts about whether a federal court could hear this case, as it would not involve the kind of concrete dispute needed under the Constitution’s “case or controversy” requirement for federal court jurisdiction. Justice William Johnson, concurring in the Supreme Court’s eventual resolution, acknowledged that there was strong evidence of a “feigned case.” He sarcastically concluded, “My confidence…in the respectable gentlemen who have been engaged for the parties, has induced me to abandon my scruples, in the belief that they would never consent to impose a mere feigned case upon this court.” Never, indeed. What was one more abandonment of scruples in this matter, after all?

Among the “respectable gentlemen” was Joseph Story, future founding professor of the Harvard Law School and less than two years from joining Johnson on the Supreme Court. He had also been a lobbyist before Congress for his company. Another was Senator (and future President) John Quincy Adams. A third, on Fletcher’s side, was the “federal bull dog,” long-time Maryland Attorney General Luther Martin, counsel for Justice Samuel Chase in his impeachment trial before the Senate, defense attorney for Vice-President Aaron Burr at his treason trial, and attorney for Maryland in the foundational case of McCulloch v. Maryland. Martin, a heavy drinker, appeared for the argument intoxicated. In what is surely a unique tribute to Martin’s standing among the legal fraternity at the time, John Marshall adjourned the Court’s session to allow Martin to sober up. Once sober, Martin delivered an unusually brief and tepid argument for Fletcher (and, by extension, for Georgia and its repeal statute) that ignored a couple of crucial issues, lending further credence to the collusion claim.

The federal trial court upheld the original Georgia grant. Still, Fletcher appealed, because, technically, he lost. More important, a circuit court opinion would not protect investors in other states, so a Supreme Court decision was needed. The matter eventually reached that tribunal in 1809. Due to procedural complications, the case was held over a year. When the Court finally decided the case, in 1810, Marshall did not let technical concerns about collusion and lack of a concrete dispute stand in the way of resolving–at long last–the constitutional issues.

Based on his experience in the Virginia legislature and his observations of other such bodies, Marshall had become convinced that legislatures too readily disregarded the rights of creditors and were too quick to relieve debtors of their obligations. Such legislation produced economic turmoil in that it made the propertied class less willing to risk money needed for new enterprises, thereby increasing the cost of innovation. Marshall also viewed this more profoundly as a breach of faith by those seeking to avoid their obligations, a matter that frayed the bonds of community by “confound[ing] liberty with an exemption from legal control,” and that required “protection of the rights of the peaceable and quiet, from the invasions of the licentious and turbulent part of the community.” There was also a more directly personal angle. Marshall and his brother James themselves had invested in such land syndications. The largest of these was their purchase of 160,000 acres of land from the estate of Lord Fairfax. Virginia had confiscated and sold that land to others, which eventually produced its own litigation to come before the Court a few years after Fletcher.

Marshall was not alone in his concerns. Hence, Article I, Section 10, of the Constitution prohibits states from interfering with the obligations of contracts. Marshall also could rely on lower court opinions, such as Justice William Paterson’s opinion in the 1795 circuit court case Van Horne’s Lessee v. Dorrance and the Massachusetts supreme court’s 1796 opinion in Derby v. Blake, both of which had struck down attempted revocations by states of earlier land grants as violations of the Contracts Clause. Even more persuasive may have been the opinion of Alexander Hamilton, who had been retained by the Yazoo land companies to advise them on the legality of the Georgia repeal act. Hamilton’s 1796 advisory to his clients laid out the argument on the Contracts Clause and broader principles. As happened in other major cases, such as Marbury v. Madison and McCulloch v. Maryland, Hamilton’s arguments found their way into Marshall’s opinion, sometimes almost verbatim.

On several levels, then, Marshall was inclined to favor the “Yazooists.” Addressing the validity of the repeal, three issues arose. Was the original grant a valid conveyance despite the allegations of bribery? If so, is a subsequent legislature nevertheless free to disregard the acts of its predecessor? If it was not, why not?

Marshall first established that a court cannot look “behind” the acts of a legislature to examine the motives of individual legislators. Questions of how much corruption, how direct the corruption (bribery or just influence), and how pervasive the corruption (one member, a majority, all) would necessarily arise. Such a course would be unworkable. It would also be constitutionally inappropriate for an unelected court to examine the motives of a legislative body. Such matters must be left to the political decisions of the voters. The courts have generally followed that rule. Therefore, even if bribery produced the 1795 grant, proper recourse was to turn out those legislators, as happened, or to prosecute, not to void the grant.

On the second point, Marshall agreed with the fundamental principle that a legislature cannot bind its successor in law, any more than an executive can bind his successor, a supreme court can bind its successor, or a sovereign people can bind theirs. However, that principle only applies to discretionary acts of legislation. A legislature may enact a tax that a later one alters or repeals. But that principle does not apply where the earlier act vests rights in a person that the later legislature seeks to abolish.

It only remained to determine the basis for the repeal act’s invalidity. Marshall’s conclusion was that it violated the Contracts Clause. Marshall noted that “contracts” was not defined, so the clause was not limited to state interference with purely private contracts, such as by debtor relief laws. It also applied to grants by states. Equally significant was Marshall’s alternative basis that the repeal act violated “general principles…common to our free institutions.” Marshall, like many of his time, saw security in property as the basis of civilization and progress. Unlike current Court doctrine, property and liberty were inseparable. Mirroring sentiment expressed in other cases, Marshall, in effect, said that, even had there been no Contracts Clause, the 1796 repeal law was so profoundly destructive of the social compact and human freedom that no court could countenance it.

Justice Johnson’s concurrence was even more rooted in extra-constitutional philosophy. Disagreeing with Marshall’s interpretation of the Contracts Clause, he moored his disapproval of the repeal act exclusively to “a general principle, on the reason and nature of things: a principle which will impose laws even on the deity.” He agreed with the essential significance of property to self and society, declaring that property, once vested in the owner, “becomes intimately blended with his existence, as essentially so as the blood that circulates through his system.”

Johnson’s musings about the existence of a “nature” of God and its limit on His omnipotence might not go unchallenged by theologians. However, they indicate how much natural law reasoning influenced him. Moreover, his and Marshall’s reliance on principles outside the constitutional text established a judicial aura of sanctity for vested rights that guided pro-growth and pro-business decisions until the 1930s. That doctrine, known today as “substantive due process” and filtered through the due process clauses of the Fifth and Fourteenth Amendments, no longer protects a person against laws that create insecurity in property. Instead, its use today is to protect other, judicially-selected attributes of personal autonomy, such as a general “right to privacy” in marriage and reproduction. All the while, there have been fierce contests about the legitimacy of judges referring at all to philosophical principles outside the Constitution’s text for their reasoning.

The controversy over Yazoo did not end with the Court’s decision in Fletcher v. Peck in 1813. Peck’s victory was hollow in that Georgia had sold its western territories to the United States after the repeal act, with the proviso that up to 5 million acres be used to settle claims arising out of the Yazoo grants. Some of that land went to innocent purchasers under the original grant. More significant from the position of the Yazooists was that, after nearly two decades of failure, their attempts to have the federal government compensate them for their lost investment bore fruit. On March 31, 1814, President James Madison signed a bill that provided $5 million to compensate those original investors who did not want actually to settle on Yazoo lands.

The end came largely due to political fatigue with a controversy that had plagued the first four administrations. After twenty-five years of political theater, it was best to settle the matter. The nation was dealing with the War of 1812. Pressure had also become politically overwhelming to open up the Old Southwest to settlement, which could now proceed in a systematic manner. Even Thomas Jefferson, retired at Monticello, could rouse himself only to a formulaic criticism of John Marshall, complaining that his third cousin’s “twistifications” in Fletcher showed the “cunning and sophistry within which he is able to shroud himself.”

Historians have traditionally characterized the Yazoo grants as the illegitimate product of bribery, fraud, and corruption. That judgment may well be correct, but some caution is in order. The treasury of the State of Georgia was empty, and the state desperately needed money. Through the sale, it received $500,000 in gold. Using current values, and accounting for the difference in population, it is analogous to giving nearly $100 billion to the United States treasury. Moreover, Georgia received this money for land, much of which was under the control of the Cherokees and the Creeks, and part of which was claimed by Spain. Georgia could not guarantee eventual title or even peaceful possession, and all risks about this were assumed by the purchasers. So, even if the sale was ethically or criminally marred, it did not mean it was a bad deal for the state.

Fletcher v. Peck (1810) 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: