Rights of Corporations

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Rights of Corporations

The California Constitution. In 1879 the state of California drew up a new constitution that tried to bring corporations, particularly railroads, under the control of the state. A Board of Equalization was established to set tax rates for railroads, ensuring that large businesses paid their fair share in taxes. A new Railroad Commission also set rates and investigated business practices. Lawyers representing the railroad companies thought that both measures were unconstitutional under the Fourteenth Amendment to the Constitution.

The Fourteenth Amendment. In 1868 the Fourteenth Amendment was adopted. Its first section reads:

All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

The Slaughterhouse Cases. In 1873 the Supreme Court restricted this broad protection of citizens against state I encroachment in a series of three suits known as the Slaughterhouse Cases, which involved a Louisiana law regulating a livestock company. The Court said that people held most of their rights as citizens of the states, that the “privileges or immunities” people possessed as citizens of the United States were limited to participating in elections, seeking redress from the federal government, and using seaports and navigable rivers. Fundamental rights, the Court maintained, came to individuals as citizens of the states, and the states could limit these rights. Justice Stephen Field and three other justices dissented in this case, arguing for a broad interpretation of the amendment. Among the fundamental rights of citizens of the United States were the right to travel and pursue a profession, and, according to Field, a state could not limit these rights.

San Mateo v. Southern Pacific Railroad Company. When the California Supreme Court ruled against the railroads in San Mateo v. Southern Pacific Railroad Company (1882), they transferred their case to the federal circuit court. (Aside from being a Supreme Court justice, Field was also chief judge for the circuit court in California.) The railroad companies argued that they had been deprived of equal protection under the law, since California allowed most taxpayers the right to deduct mortgage payments from their tax bills, but did not allow railroads to do so. The Equalization Board of the state set tax rates without consulting the railroads, thus depriving them of property without due process of law. The state argued that it had an unlimited power to tax, that corporations it chartered were subject to state regulation, and that the Fourteenth Amendment was designed to protect former slaves, not railroads.

JUSTICE FIELD RETIRES

In the late nineteenth century Stephen J. Field (1816-1899) was the Supreme Court’s intellectual giant and one of its most controversial figures. Appointed by Abrah am Lincoln in 1863, Stephen I Field was promoted as a Democratic presidential candidate in 1880. In 1889 he was assaulted by David Terry, the former chief justice of the California Supreme Court. In the ensuing scuffle Field’s bodyguard shot and killed Terry. The next year Field’s nephew, David Brewer, joined him on the court.

Field dominated his colleagues through his powerful mind and sometimes explosive temper. However, in the 1890s Field began to exhibit signs of senility; he dozed during arguments and sometimes did not understand the case at hand. Chief Justice Melville Fuller stopped assigning cases to Field, who could not understand why. His periods of confusion alternated with moments of lucidity. Nevertheless, in 1896 the other members of the court decided to approach Field and to convince him to resign. (As a Supreme Court justice, Field was entitled to serve for life.) Justice John M. Harlan, the most senior justice after Field, was delegated to discuss the matter with Field. Finding him dozing in the justices’ robing room, apparently unaware of his surroundings, Harlan gradually approached the question. He noted that in 1869 Field, as the most junior judge, had been sent by his colleagues to convince the elderly Justice Robert Grier to retire. He recalled that Grier’s resignation was in the Court’s best interest. At first Field showed no sign of understanding, but gradually became more alert and concentrated. When Harlan asked if Field recalled what he had said to Grier that day, the old justice retorted, “Yes! And a dirtier day’s work I never did in my life!”

The justices made no more attempts to persuade Field to retire. In April 1897 Field notified President William McKinley that he would retire in December. Field’s term of 34 years, 8 months, and 20 days eclipsed by three months the record set by Chief Justice John Marshall in 1835 (34 years, 5 months, 9 days). It would eventually be broken in 1975 by Justice William O, Douglas (36 years, 7 months, 8 days).

Source: Kermit L, Hall, ed., The Oxford Companion H the Supreme Court üftbe United States (New York & Oxford: Oxford University Press, 1992).

The Rights of Railroads. On 25 September 1882 Justice Field agreed with the Southern Pacific Railroad Company. “Whatever acts may be imputed justly or unjustly to the corporations,” Field wrote, “they are entitled when they enter the tribunals of the nation to have the same justice meted out to them which is meted out to the humblest citizen. There cannot be one law for them and another law for others.” Field acknowledged that the Fourteenth Amendment meant to guarantee civil rights of freed people, but its broad language made it more than a civil rights act. After the verdict Field received much criticism for attending a banquet given by I Central Pacific president Leland Stanford to thank the lawyers who had argued the case. Although Field and

Stanford were old friends, it is doubtful that the banquet influenced the judge’s decision.

Conkling. California appealed the case to the United States Supreme Court, which heard arguments on 19 December. Roscoe Conkling, a former senator from New York who had declined an appointment to the Supreme Court earlier in the year, argued the case for the railroads. Conkling had helped to write the Fourteenth Amendment and insisted that the framers had intended to protect railroads and other corporations from oppressive state taxation. “At the time when the Fourteenth Amendment was ratified,” he told the Court, “as the records of the two houses will show, individuals and joint stock companies were appealing for congressional and administrative protection against invidious and discriminating state and local taxes. One instance was that of an express company, whose stock was owned largely by citizens of the State of New York, who came with petitions and bills seeking acts of Congress to aid them in resisting what they deemed oppressive taxation in two states, and oppressive and ruinous rules of damages applied under state laws. . . . That complaints of oppression, in respect of property and other rights, made by citizens of the Northern states who took up residence in the South, were rife in and out of Congress, none of us can forget.” According to Conkling the status of the freed people had made the amendment necessary, but the real reasons behind the legislation were oppressive state laws.

The Supreme Court Responds. The railroads and California agreed to settle the San Mateo suit out of court, but argued the same points in a new case, Santa Clara County v. Southern Pacific Railroad Company