July 01, 2002

Reviews: Railroads, American Law and American Society (2002, 16:04)

Railroads, American Law and American Society

Probate and Property, November/December 2002, Volume 16, Number  4

James W. Ely, Jr.,
Railroads and American Law ,
University Press of Kansas (Lawrence, Kan., 2001, ix + 365 pp.),

Reviewed by Steven J. Eaglefrom other issues of Probate and Property

Most Americans are following the roller coaster development of dot-com enterprises and the dramatic growth of what has become known as intellectual property law. We sense that technology is reshaping legal concepts and that law, in turn, is redirecting technology. Although it is too early to tell the ramifications of these developments on other areas of law and on society as a whole, we know that they will be profound.

Just as digital innovation and commerce fill our horizon today, railroad transportation dominated an earlier era. Writing in a straightforward and graceful style, Professor James Ely produces exactly what his title promises—the saga of railroads, American law, and how they interacted throughout American history.

Professor Ely does not adumbrate an overarching theory. Instead, the reader will find discrete, nuanced, and highly readable chapters, each explaining a particular aspect of the complex relationship between law and society. Ely emphasizes the broad picture and major trends, while briefly explaining exceptions and alluding to innumerable variations. For the specialist, an extensive bibliography and comprehensive endnotes will facilitate further research.

As lawyers would expect, Railroads and American Law gives ample treatment to the impact of railroads on regulation of interstate commerce. Ely’s chapter “Arteries of Commerce” begins with litigation during the first half of the nineteenth century over the construction of railroad bridges over navigable waters, an issue raised energetically by canal operators and steamboat owners. (Then, as in more recent years, complaints about railroad behavior invoked the name of the people but were raised largely by competitors.)

The chapter then addresses the principal legal issue of the late nineteenth century, the extent of the federal government’s dormant commerce power and of congressional preemption of state legislation. As the first industry using vast amounts of capital and national in scope, railroads were subject to numerous forms of state regulation, often imposed at the behest of various groups of shippers or competitors. As Ely concludes, the ensuing Commerce Clause litigation had a major impact on American law by enhancing the authority of federal courts and in setting the stage for a larger federal role in regulating the economy.

Tort law largely has been reshaped through railroad cases as well. Ely discusses the development of the states’ police power through litigation in a chapter on “Law Governing Railroad Operations,” which encompasses statutes requiring right-of-way fencing, injury to livestock, and requirements for warnings at grade crossings. A separate chapter on “Liability for Personal Injury” begins with some statistics on the horrific rate of railroad accidents, with some 6,000 people dying and another 40,000 being injured annually by 1890.

Ely notes that some commentators viewed the low level of railroad accountability for personal injuries as a subsidy for large enterprises, with community safety standards being subordinated to economic growth. Other commentators viewed it as indicative of the spirit of the age, with individuals responsible for the consequences of their behavior and liability being limited to instances of fault. Although the fellow servant rule, contributory negligence, and assumption of risk largely immunized railroads from liability, Ely points out that in many cases courts found exceptions to these rules. Inflamed popular opinion led to passage of a number of laws requiring railroads to take safety measures, and the Federal Employer’s Liability Act of 1908 abrogated the fellow servant rule. These were upheld by the Supreme Court as regulating interstate commerce.

Of particular interest to readers of Probate & Property, Ely’s chapter on “Property and Taxation” discusses eminent domain and taxation of railroad property. Early railroad charters and legislation tended to provide railroads the power to condemn fee interests. Under an increased emphasis on landowner rights after the Civil War, however, statutes more typically limited eminent domain to acquisition of easements of way. That issue persists into contemporary law, most notably in “rails-to-trails” cases. Railroad rights of way that subsequently are abandoned remain the property of the railroad and its successors if originally acquired in fee. These may freely be converted into recreational trails. If the rights were obtained by easement, however, abandonment triggers reversion to the landowner on whose lands the lines were built. Because the status of abandoned rights of way sometimes is unclear, significant litigation has resulted.

The taxation of railroad property always has been a complicated problem. As Professor Ely explains, favoritism for large corporations might result in underassessment. On the other hand, railroads were wealthy, distant corporations with immobile property in numerous localities. As such, they were natural targets for municipalities and counties that wished to impose discriminatory takes for the benefit of local ratepayers. Although Congress in 1976 prohibited discriminatory state taxation and gave railroads recourse to federal courts for injunctive relief, Professor Ely leaves the reader with the view that unequal taxation problems are doomed to continue.

Just as railroads played a leading role in the shaping of tort law and defining the limits of the Commerce Clause, they also served as the launching pad for the development of the administrative state. Ely points out that railroads were the natural objects of such regulation, because their capital represented a full seventh of the national wealth and they controlled related businesses such as mines, hotels, and steamship lines. His chapter “Railroads in the Progressive Era” tells the story of how reformers with a fervor for administration by experts and for correcting the imbalance of wealth in the new industrial order worked to strengthen economic regulation of railroads by the nascent Interstate Commerce Commission (ICC).

As Ely relates the story, the 1906 Hepburn Act was at the center of the debate over the nature of Progressivism and the reasons behind railroad regulation. The Act required that, upon receipt of a complaint, the ICC determine “the just and reasonable rate” to be charged by railroads. In evaluating the conflicting evidence, the author suggests that it was not the farmers but, rather, small merchants who led the charge for greater rate regulation. The Hepburn Act was followed by the Mann-Elkins Act (1910), which gave the ICC the power to set rates, and the Valuation Act (1913), by which railroad assets were to be valued for purposes of determining a fair rate of return on investment. Determinations under these laws largely were upheld by the courts, although the Supreme Court still was wary of administrative controls.

In the end, Ely notes, the complexity of rate regulation might have overwhelmed the regulatory process and, in any event, sweeping federal controls led to a weakening of railroads that benefited neither the industry nor its customers. Thus, he concludes, a reappraisal of reform era legislation might conclude that it was a failure. Certainly it left the railroads ill-prepared to deal with the rise of the passenger car and the trucking industry after World War I.

The chapter on “Tangled Labor Relations” outlines how the Railway Labor Act (1926) and kindred legislation resulted not in stable labor relationships but, rather, in mutually destructive acrimony. In an industry less redolent of historic importance, government’s regulatory hand might have lightened under changed circumstances. In the case of American railroads, however, prohibitions against abandonment of unprofitable lines and other ossifying practices led to inevitable decline.

Apart from its comprehensive overview of the more narrowly focused topics, one of the most appealing aspects of Professor Ely’s book is its accounts of how railroads and railroad law changed American society. One aspect of this, of course, involves racial segregation of passengers. This practice died out among Northern lines during the latter part of the nineteenth century but unevenly persisted in the South. Indeed, as Professor Ely makes clear, the state “separate but equal” legislation countenanced by the Supreme Court in Plessy v. Ferguson (1896) resulted from, and often was undermined by, railroads that permitted blacks to ride with whites in order to avoid expensive duplicate facilities.

Similarly, “ladies cars,” limited to women, children, and the men accompanying them, were provided by carriers and upheld by courts to an extent during the nineteenth century. Indeed, this pattern of separation by sexes gave support to advocates of separation by race. Sunday operation of railroads was a thorny problem since colonial days. Sabbatarians augmented their religious grounds for prohibition with the secular purpose of providing a uniform day of rest. Against them was the growing realization of the importance of railroad transportation and, especially during the twentieth century, the growing secularization of society. Ultimately, claims of “charity” and “necessity” undermined blue laws respecting passenger travel, and concerns about the requirements of the Commerce Clause did the same respecting freight.

In his “Epilogue,” Professor Ely suggests that railroads from the first have been subject to legal and political restraint and that nineteenth century eminent domain and tort law represented an attempt to harmonize protection of individuals with respect for private property and individual responsibility. The Supreme Court’s railroad jurisprudence likewise defies easy characterization. When extensive regulation did come, in the form of the ICC regulation, it was reactive. “Many factors, of course, contributed to the decline of the rail industry, but fossilized regulatory law must bear a large share of the blame.”

Railroads and American Law should be on the shelves of not only legal historians but also all lawyers and policymakers interested in the interaction of new technologies with the legal system and economic regulation. Its lesson—that perceived industry abuses will lead to legislation that in turn will disappoint even proponents—should be a sobering one for all concerned.

Steven J. Eagle is a professor of law at George Mason University School of Law in Fairfax, Virginia, and a vice-chair of the D-1 Land Use Regulation Committee.