Regulation of Public Utilities and Common Carriers
In General.

Because of the nature of the business they carry on and the public’s interest in it, public utilities and common carriers are subject to state regulation, whether exerted directly by legislatures or under authority delegated to administrative bodies.191 But because the property of these entities remains under the full protection of the Constitution, it follows that due process is violated when the state regulates in a manner that infringes the right of ownership in what the Court considers to be an “arbitrary” or “unreasonable” way.192 Thus, when a street railway company lost its franchise, the city could not simply take possession of its equipment,193 although it could subject the company to the alternative of accepting an inadequate price for its property or of ceasing operations and removing its property from the streets.194 Likewise, a city wanting to establish a lighting system of its own may not remove, without compensation, the fixtures of a lighting company already occupying the streets under a franchise,195 although a city may compete with a company that has no exclusive charter.196 However, a municipal ordinance that demanded, as a condition for placing poles and conduits in city streets, that a telegraph company carry the city’s wires free of charge, and that required that conduits be moved at company expense, was constitutional.197

And, the fact that a state, by mere legislative or administrative fiat, cannot convert a private carrier into a common carrier will not protect a foreign corporation that has elected to enter a state that requires that it operate its local private pipe line as a common carrier. Such a foreign corporation is viewed as having waived its constitutional right to be secure against the imposition of conditions that amount to a taking of property without due process of law.198

Compulsory Expenditures: Grade Crossings, and the Like.

Generally, the enforcement of uncompensated obedience to a regulation for the public health and safety is not an unconstitutional taking of property in violation of due process.199 Thus, where a water company laid its lines on an ungraded street, and the applicable rule at the time of the granting of its charter compelled the company to furnish connections at its own expense to one residing on such a street, due process is not violated.200 Or, where a gas company laid its pipes under city streets, it may validly be obligated to assume the cost of moving them to accommodate a municipal drainage system.201 Or, railroads may be required to help fund the elimination of grade crossings, even though commercial highway users, who make no contribution whatsoever, benefit from such improvements.

Although the power of the state in this respect is not unlimited, and an “arbitrary” and “unreasonable” imposition on these businesses may be set aside, the Court’s modern approach to substantive due process analysis makes this possibility far less likely than it once was. For instance, a 1935 case invalidated a requirement that railroads share 50% of the cost of grade separation, irrespective of the value of such improvements to the railroad, suggesting that railroads could not be required to subsidize competitive transportation modes.202 But in 1953 the Court distinguished this case, ruling that the costs of grade separation improvements need not be allocated solely on the basis of benefits that would accrue to railroad property.203 Although the Court cautioned that “allocation of costs must be fair and reasonable,” it was deferential to local governmental decisions, stating that, in the exercise of the police power to meet transportation, safety, and convenience needs of a growing community, “the cost of such improvements may be allocated all to the railroads.”204

Compellable Services.

A state may require that common car-riers such as railroads provide services in a manner suitable for the convenience of the communities they serve.205 Similarly, a primary duty of a public utility is to serve all those who desire the service it renders, and so it follows that a company cannot pick and choose to serve only those portions of its territory that it finds most profitable. Therefore, compelling a gas company to continue serving specified cities as long as it continues to do business in other parts of the state does not constitute an unconstitutional deprivation.206 Likewise, requiring a railway to continue the service of a branch or part of a line is acceptable, even if that portion of the operation is an economic drain.207 A company, however, cannot be compelled to operate its franchise at a loss, but must be at liberty to surrender it and discontinue operations.208

As the standard for regulation of a utility is whether a particular directive is reasonable, the question of whether a state order requiring the provision of services is reasonable could include a consideration of the likelihood of pecuniary loss, the nature, extent and productiveness of the carrier’s intrastate business, the character of the service required, the public need for it, and its effect upon service already being rendered.209 An example of the kind of regulation where the issue of reasonableness would require an evaluation of numerous practical and economic factors is one that requires railroads to lay tracks and otherwise provide the required equipment to facilitate the connection of separate track lines.210

Generally, regulation of a utility’s service to commercial customers attracts less scrutiny211 than do regulations intended to facilitate the operations of a competitor,212 and governmental power to regulate in the interest of safety has long been conceded.213 Requirements for service having no substantial relation to a utility’s regulated function, however, have been voided, such as requiring railroads to maintain scales to facilitate trading in cattle, or prohibiting letting down an unoccupied upper berth on a rail car while the lower berth was occupied.214

Imposition of Statutory Liabilities and Penalties Upon Common Carriers.

Legislators have considerable latitude to impose legal burdens upon common carriers, as long as the carriers are not precluded from shifting such burdens. Thus, a statute may make an initial rail carrier,215 or the connecting or delivering carrier,216 liable to the shipper for the nondelivery of goods which results from the fault of another, as long as the carrier has a subrogated right to proceed against the carrier at fault. Similarly, a railroad may be held responsible for damages to the owner of property injured by fire caused by locomotive engines, as the statute also granted the railroad an insurable interest in such property along its route, allowing the railroad to procure insurance against such liability.217 Equally consistent with the requirements of due process are enactments imposing on all common carriers a penalty for failure to settle claims for freight lost or damaged in shipment within a reasonable specified period.218

The Court has, however, established some limits on the imposition of penalties on common carriers. During the Lochner era, the Court invalidated an award of $500 in liquidated damages plus reasonable attorney’s fees imposed on a carrier that had collected transportation charges in excess of established maximum rates as disproportionate. The Court also noted that the penalty was exacted under conditions not affording the carrier an adequate opportunity to test the constitutionality of the rates before liability attached.219 Where the carrier did have an opportunity to challenge the reasonableness of the rate, however, the Court indicated that the validity of the penalty imposed need not be determined by comparison with the amount of the overcharge. Inasmuch as a penalty is imposed as punishment for violation of law, the legislature may adjust its amount to the public wrong rather than the private injury, and the only limitation which the Fourteenth Amendment imposes is that the penalty prescribed shall not be “so severe and oppressive as to be wholly disproportionate to the offense and obviously unreasonable.”220

Footnotes

191
Atlantic Coast Line R.R. v. Corporation Comm’n, 206 U.S. 1, 19 (1907) (citing Chicago, B. & Q. R.R. v. Iowa, 94 U.S. 155 (1877)). See also Prentis v. Atlantic Coast Line Co., 211 U.S. 210 (1908) ; Denver & R.G. R.R. v. Denver, 250 U.S. 241 (1919). [Back to text]
192
Chicago & G.T. Ry. v. Wellman, 143 U.S. 339, 344 (1892); Mississippi R.R. Comm’n v. Mobile & Ohio R.R., 244 U.S. 388, 391 (1917). See also Missouri Pacific Ry. v. Nebraska, 217 U.S. 196 (1910); Nashville, C. & St. L. Ry. v. Walters, 294 U.S. 405, 415 (1935). [Back to text]
193
Cleveland Electric Ry. v. Cleveland, 204 U.S. 116 (1907). [Back to text]
194
Detroit United Ry. v. Detroit, 255 U.S. 171 (1921). See also Denver v. New York Trust Co., 229 U.S. 123 (1913). [Back to text]
195
Los Angeles v. Los Angeles Gas Corp., 251 U.S. 32 (1919). [Back to text]
196
Newburyport Water Co. v. City of Newburyport, 193 U.S. 561 (1904). See also Skaneateles Water Co. v. Village of Skaneateles, 184 U.S. 354 (1902); Helena Water Works Co. v. Helena, 195 U.S. 383 (1904); Madera Water Works v. City of Madera, 228 U.S. 454 (1913). [Back to text]
197
Western Union Tel. Co. v. Richmond, 224 U.S. 160 (1912). [Back to text]
198
Pierce Oil Corp. v. Phoenix Ref. Co., 259 U.S. 125 (1922). [Back to text]
199
Norfolk Turnpike Co. v. Virginia, 225 U.S. 264 (1912) (requiring a turnpike company to suspend tolls until the road is put in good order does not violate due process of law, notwithstanding that present patronage does not yield revenue sufficient to maintain the road in proper condition); International Bridge Co. v. New York, 254 U.S. 126 (1920) (in the absence of proof that the addition will not yield a reasonable return, a railroad bridge company is not deprived of its property when it is ordered to widen its bridge by inclusion of a pathway for pedestrians and a roadway for vehicles.); Chicago, B. & Q. R.R. v. Nebraska, 170 U.S. 57 (1898) (railroads may be required to repair viaduct under which they operate); Chicago, B. & Q. Ry. v. Drainage Comm’n, 200 U.S. 561 (1906) (reconstruct a bridge or provide means for passing water for drainage through their embankment); Chicago & Alton R.R. v. Tranbarger, 238 U.S. 67 (1915) (drainage requirements); Lake Shore & Mich. So. Ry. v. Clough, 242 U.S. 375 (1917) (drainage requirements); Pacific Gas Co. v. Police Court, 251 U.S. 22 (1919) (requirement to sprinkle street occupied by railroad.). But see Chicago, St. P., Mo. & O. Ry. v. Holmberg, 282 U.S. 162 (1930) (due process violated by a requirement that an underground cattle-pass is be constructed, not as a safety measure but as a convenience to farmers). [Back to text]
200
Consumers’ Co. v. Hatch, 224 U.S. 148 (1912). However, if pipe and telephone lines are located on a right of way owned by a pipeline company, the latter cannot, without a denial of due process, be required to relocate such equipment at its own expense. Panhandle Eastern Pipeline Co. v. Highway Comm’n, 294 U.S. 613 (1935). [Back to text]
201
New Orleans Gas Co. v. Drainage Comm’n, 197 U.S. 453 (1905). [Back to text]
202
Nashville, C. & St. L. Ry. v. Walters, 294 U.S. 405 (1935). See also Lehigh Valley R.R. v. Commissioners, 278 U.S. 24, 35 (1928) (upholding imposition of grade crossing costs on a railroad although “near the line of reasonableness,” and reiterating that “unreasonably extravagant” requirements would be struck down). [Back to text]
203
Atchison, T. & S.F. Ry. v. Public Util. Comm’n, 346 U.S. 346 (1953). [Back to text]
204
346 U.S. at 352. [Back to text]
205
Atchison, T. & S. F. Ry. v. Public Utility Comm’n, 346 U.S. at 394–95 (1953). See Minneapolis & St. L. R.R. v. Minnesota, 193 U.S. 53 (1904) (obligation to establish stations at places convenient for patrons); Gladson v. Minnesota, 166 U.S. 427 (1897) (obligation to stop all their intrastate trains at county seats); Missouri Pac. Ry. v. Kansas, 216 U.S. 262 (1910) (obligation to run a regular passenger train instead of a mixed passenger and freight train); Chesapeake & Ohio Ry. v. Public Serv. Comm’n, 242 U.S. 603 (1917) (obligation to furnish passenger service on a branch line previously devoted exclusively to carrying freight); Lake Erie & W.R.R. v. Public Util. Comm’n, 249 U.S. 422 (1919) (obligation to restore a siding used principally by a particular plant but available generally as a public track, and to continue, even though not profitable by itself, a sidetrack); Western & Atlantic R.R. v. Public Comm’n, 267 U.S. 493 (1925) (same); Alton R.R. v. Illinois Commerce Comm’n, 305 U.S. 548 (1939) (obligation for upkeep of a switch track leading from its main line to industrial plants.). But see Missouri Pacific Ry. v. Nebraska, 217 U.S. 196 (1910) (requirement, without indemnification, to install switches on the application of owners of grain elevators erected on right-of-way held void). [Back to text]
206
United Gas Co. v. Railroad Comm’n, 278 U.S. 300, 308–09 (1929). See also New York ex rel. Woodhaven Gas Light Co. v. Public Serv. Comm’n, 269 U.S. 244 (1925); New York & Queens Gas Co. v. McCall, 245 U.S. 345 (1917). [Back to text]
207
Missouri Pacific Ry. v. Kansas, 216 U.S. 262 (1910); Chesapeake & Ohio Ry. v. Public Serv. Comm’n, 242 U.S. 603 (1917); Fort Smith Traction Co. v. Bourland, 267 U.S. 330 (1925). [Back to text]
208
Chesapeake & Ohio Ry. v. Public Serv. Comm’n, 242 U.S. 603, 607 (1917); Brooks-Scanlon Co. v. Railroad Comm’n, 251 U.S. 396 (1920); Railroad Comm’n v. Eastern Tex. R.R., 264 U.S. 79 (1924); Broad River Co. v. South Carolina ex rel. Daniel, 281 U.S. 537 (1930). [Back to text]
209
Chesapeake & Ohio Ry. v. Public Serv. Comm’n, 242 U.S. 603, 607 (1917). [Back to text]
210
“Since the decision in Wisconsin, M. & P.R. Co. v. Jacobson, 179 U.S. 287 (1900), there can be no doubt of the power of a state, acting through an administrative body, to require railroad companies to make track connections. But manifestly that does not mean that a Commission may compel them to build branch lines, so as to connect roads lying at a distance from each other; nor does it mean that they may be required to make connections at every point where their tracks come close together in city, town and country, regardless of the amount of business to be done, or the number of persons who may use the connection if built. The question in each case must be determined in the light of all the facts and with a just regard to the advantage to be derived by the public and the expense to be incurred by the carrier. . . . If the order involves the use of property needed in the discharge of those duties which the carrier is bound to perform, then, upon proof of the necessity, the order will be granted, even though ‘the furnishing of such necessary facilities may occasion an incidental pecuniary loss.’ . . . Where, however, the proceeding is brought to compel a carrier to furnish a facility not included within its absolute duties, the question of expense is of more controlling importance. In determining the reasonableness of such an order the Court must consider all the facts—the places and persons interested, the volume of business to be affected, the saving in time and expense to the shipper, as against the cost and loss to the carrier.” Washington ex rel. Oregon R.R. & Nav. Co. v. Fairchild, 224 U.S. 510, 528–29 (1912). See also Michigan Cent. R.R. v. Michigan R.R. Comm’n, 236 U.S. 615 (1915); Seaboard Air Line R.R. v. Georgia R.R. Comm’n, 240 U.S. 324, 327 (1916). [Back to text]
211
Due process is not denied when two carriers, who wholly own and dominate a small connecting railroad, are prohibited from exacting higher charges from shippers accepting delivery over said connecting road than are collected from shippers taking delivery at the terminals of said carriers. Chicago, M. & St. P. Ry. v. Minneapolis Civic Ass’n, 247 U.S. 490 (1918). Nor are railroads denied due process when they are forbidden to exact a greater charge for a shorter distance than for a longer distance. Louisville & Nashville R.R. v. Kentucky, 183 U.S. 503, 512 (1902); Missouri Pacific Ry. v. McGrew Coal Co., 244 U.S. 191 (1917). Nor is it “unreasonable” or “arbitrary” to require a railroad to desist from demanding advance payment on merchandise received from one carrier while it accepts merchandise of the same character at the same point from another carrier without such prepayment. Wadley Southern Ry. v. Georgia, 235 U.S. 651 (1915). [Back to text]
212
Although a carrier is under a duty to accept goods tendered at its station, it cannot be required, upon payment simply for the service of carriage, to accept cars offered at an arbitrary connection point near its terminus by a competing road seeking to reach and use the former’s terminal facilities. Nor may a carrier be required to deliver its cars to connecting carriers without adequate protection from loss or undue detention or compensation for their use. Louisville & Nashville R.R. v. Stock Yards Co., 212 U.S. 132 (1909). But a carrier may be compelled to interchange its freight cars with other carriers under reasonable terms, Michigan Cent. R.R. v. Michigan R.R. Comm’n, 236 U.S. 615 (1915), and to accept cars already loaded and in suitable condition for reshipment over its lines to points within the state. Chicago, M. & St. P. Ry. v. Iowa, 233 U.S. 334 (1914). [Back to text]
213
The following cases all concern the operation of railroads: Railroad Co. v. Richmond, 96 U.S. 521 (1878) (prohibition against operation on certain streets); Atlantic Coast Line R.R. v. Goldsboro, 232 U.S. 548 (1914) (restrictions on speed and operations in business sections); Great Northern Ry. v. Minnesota ex rel. Clara City, 246 U.S. 434 (1918) (restrictions on speed and operations in business section); Denver & R.G. R.R. v. Denver, 250 U.S. 241 (1919) (or removal of a track crossing at a thoroughfare); Nashville, C. & St. L. Ry. v. White, 278 U.S. 456 (1929) (compelling the presence of a flagman at a crossing notwithstanding that automatic devices might be cheaper and better); Nashville, C. & St. L. Ry. v. Alabama, 128 U.S. 96 (1888) (compulsory examination of employees for color blindness); Chicago, R.I. & P. Ry. v. Arkansas, 219 U.S. 453 (1911) (full crews on certain trains); St. Louis I. Mt. & So. Ry. v. Arkansas, 240 U.S. 518 (1916) (same); Missouri Pacific R.R. v. Norwood, 283 U.S. 249 (1931) (same); Firemen v. Chicago, R.I. & P.R.R., 393 U.S. 129 (1968) (same); Atlantic Coast Line R.R. v. Georgia, 234 U.S. 280 (1914) (specification of a type of locomotive headlight); Erie R.R. v. Solomon, 237 U.S. 427 (1915) (safety appliance regulations); New York, N.H. & H. R.R. v. New York, 165 U.S. 628 (1897) (prohibition on the heating of passenger cars from stoves or furnaces inside or suspended from the cars). [Back to text]
214
Chicago, M. & St. P. R.R. v. Wisconsin, 238 U.S. 491 (1915). [Back to text]
215
Chicago & N.W. Ry. v. Nye Schneider Fowler Co., 260 U.S. 35 (1922). See also Yazoo & M.V.R.R. v. Jackson Vinegar Co., 226 U.S. 217 (1912); cf. Adams Express Co. v. Croninger, 226 U.S. 491 (1913). [Back to text]
216
Atlantic Coast Line R.R. v. Glenn, 239 U.S. 388 (1915). [Back to text]
217
St. Louis & S.F. Ry. v. Mathews, 165 U.S. 1 (1897). [Back to text]
218
Chicago & N.W. Ry. v. Nye Schneider Fowler Co., 260 U.S. 35 (1922) (penalty imposed if claimant subsequently obtained by suit more than the amount tendered by the railroad). But see Kansas City Ry. v. Anderson, 233 U.S. 325 (1914) (levying double damages and an attorney’s fee upon a railroad for failure to pay damage claims only where the plaintiff had not demanded more than he recovered in court); St. Louis, I. Mt. & So. Ry. v. Wynne, 224 U.S. 354 (1912) (same); Chicago, M. & St. P. Ry. v. Polt, 232 U.S. 165 (1914) (same). [Back to text]
219
Missouri Pacific Ry. v. Tucker, 230 U.S. 340 (1913). [Back to text]
220
In accordance with this standard, a statute granting an aggrieved passenger (who recovered $100 for an overcharge of 60 cents) the right to recover in a civil suit not less than $50 nor more than $300 plus costs and a reasonable attorney’s fee was upheld. St. Louis, I. Mt. & So. Ry. v. Williams, 251 U.S. 63, 67 (1919). See also Missouri Pacific Ry. v. Humes, 115 U.S. 512 (1885) (statute requiring railroads to erect and maintain fences and cattle guards subject to award of double damages for failure to so maintain them upheld); Minneapolis & St. L. Ry. v. Beckwith, 129 U.S. 26 (1889) (same); Chicago, B. & Q.R.R. v. Cram, 228 U.S. 70 (1913) (required payment of $10 per car per hour to owner of livestock for failure to meet minimum rate of speed for delivery upheld). But see Southwestern Tel. Co. v. Danaher, 238 U.S. 482 (1915) (fine of $3,600 imposed on a telephone company for suspending service of patron in arrears in accordance with established and uncontested regulations struck down as arbitrary and oppressive). [Back to text]