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The Origins of an Expanded Federal Court Jurisdiction: Railroad Development and the Ascendancy of the Federal Judiciary

Published online by Cambridge University Press:  11 June 2012

Philip L. Merkel
Philip L. Merkel
Affiliation:
Philip L. Merkel is assistant professor of the general faculty at the University of Virginia School of Law.
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Abstract

The years following the Civil War witnessed a rapid expansion in the power of the federal judiciary. In this article, Professor Merkel reveals that the construction of the transcontinental railroad played an important role in this development. Beginning in 1868, the management of the federally chartered Union Pacific Railroad sought legislation that would authorize the company to remove lawsuits from hostile state courts to more sympathetic federal forums. Congress was accommodating, passing laws that expanded the jurisdiction of the lower federal courts. Consequently, these courts resolved many questions of transportation law, often in ways that benefitted the railroads.

Type
Research Article
Information
Business History Review , Volume 58 , Issue 3 , Autumn 1984 , pp. 336 - 358
Copyright
Copyright © The President and Fellows of Harvard College 1984

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References

1 Wiecek, William M., “The Reconstruction of Federal Judicial Power, 1863–1875,” American Journal of Legal History 13 (1969): 333–59CrossRefGoogle Scholar; Kutler, Stanley I., Judicial Power and Reconstruction Politics (Chicago, 1968), 143–60CrossRefGoogle Scholar; Hyman, Harold M., A More Perfect Union (New York, 1973), 245–62.Google Scholar

2 Western Jurist 16 (Jan. 1882): 16–17.

3 Reports of the Attorney General for the years 1876 and 1886.

4 Freyer, Tony Allen, Forums of Order: The Federal Courts and Business in American History (Greenwich, Conn., 1979), 124Google Scholar; Wiecek, “Federal Judicial Power,” 333.

5 Central Law Journal 18 (April 1884): 281–82.

6 Ibid.; Western Jurist 14 (April 1880): 150.

7 Freyer, Forums of Order, chaps. 4–6.

8 Ibid. Freyer examines the effect of Swift v. Tyson, 41 U.S. (16 Pet.) 1 (1842) on the development of a uniform law affecting corporations.

9 18 Stat. 470 (1875).

10 Chadbourn, James H. and Levin, A. Leo, “Original Jurisdiction of Federal Questions,” University of Pennsylvania Law Review 90 (April 1942): 643Google Scholar; Frankfurter, Felix and Landis, James M., The Business of the Supreme Court (New York, 1927), 65.Google Scholar

11 15 Stat. 226 (1868).

12 Trottman, Nelson, History of the Union Pacific (New York, 1923), 3.Google Scholar

13 Ames, Charles Edgar, Pioneering the Union Pacific (New York, 1969), 9–10.Google Scholar For a discussion of early railroad financing problems, see Hunt, Robert S., Law and Locomotives (Madison, Wisc., 1958), 44–65.Google Scholar

14 Act of 1 July 1862, 12 Stat. 489 (1862) (Union Pacific Railroad); Act of 2 July 1864, 13 Stat. 365 (1864) (Northern Pacific Railroad); Act of 3 March 1871, 16 Stat. 573 (1871) (Texas Pacific Railroad); Act of 2 May 1872, 17 Stat. 59 (1872) (Texas Pacific and Southern Pacific railroads consolidated).

15 12 Stat. 489 (1862). See also Trottman, History, for a concise summary of the act.

16 Dictionary of American Biography, s.v. “Durant, Thomas Clark.” The Crédit Mobilier of America was originally chartered as the Pennsylvania Fiscal Authority. The Pennsylvania legislature authorized the authority's creation on 1 November, 1859, and letters of patent were issued on 1 June 1863 (1860 Pennsylvania Laws 896). The letters of patent are among the Henry S. McComb Papers, accession 474, Eleutherian Mills Historical Library (hereinafter cited as McComb MSS).

17 Durant's use of a “dummy” construction company to build the Union Pacific was by no means innovative; other roads before this time were constructed by similar means. This tactic allowed the railroad's shareholders to receive the gains realized through construction. By, in effect, hiring themselves to do the work rather than third parties, they chalked up substantial profits. Ames, Pioneering, 48.

18 Trottman, History, 32–35. An excellent discussion of the motives of early railroad promoters is found in Supple, Barry E. and Johnson, Arthur M., Boston Capitalists and the Western Railroads (Cambridge, Mass., 1967).Google Scholar

19 Ames, Pioneering, 41–45.

20 Dictionary of American Biography, s.v. “Ames, Oliver”; “Ames, Oakes”. Oakes Ames was first elected to the House of Representatives on 4 November 1862.

21 Ames, Pioneering, 187–88. Among those who invested was John B. Alley, a former congressman from Massachusetts. Alley, who once chaired the House's Pacific Railroad Committee, served as a Union Pacific board member from 1866 to 1871. Union Pacific Railroad Company Official Register, manuscript notes of Charles Edgar Ames, Baker Library, Harvard University (hereinafter cited as Ames MSS).

22 Trottman, History, 32–35.

23 House Committee Report No. 77, 42d Cong., 3d sess., 1873, Serial 1577, 4 (hereinafter cited as Poland Report).

24 A detailed examination of the legal maneuvering before and during the 1867 annual meeting can be found in Merkel, Philip L., “Origins of an Expanded Federal Question Jurisdiction: The Fisk Raid and the Removal Act of 1868,” (M.A. thesis, University of Virginia, 1983).Google Scholar

25 Poland Report, 420–21 (testimony of John B. Alley). There are two popular biographies of Fisk: Swanberg, W. A., Jim Fisk: The Career of an Improbable Rascal (New York, 1959)Google Scholar, and Fuller, Robert H., Jubilee Jim (New York, 1928)Google Scholar (a biographical novel). See also “Sketch of James Fisk, Jr.,” New York Times, 7 Jan. 1872, 1.

26 Hicks, Frederick C., High Finance in the Sixties (1929; reprint, Port Washington, N.Y., 1966)Google Scholar; Breen, Matthew P., Thirty Years of New York Politics (1899; reprint, New York, 1974)Google Scholar; Grodinsky, Julius, Jay Gould (Philadelphia, 1957).Google Scholar

27 Fisk left no personal papers that could throw light on why he became obsessed with seizing control of the Union Pacific. The Ames faction believed Fisk wanted revenge against Durant for the latter's breach of an agreement made during the election crisis of the fall of 1867. A letter from Oliver Ames to Grenville M. Dodge, dated 27 July 1868, expressed this conviction: “Jas. Fisk the fellow who figured in the Rock Island and Erie RR controversy and made a good deal of money out of them and is also one of the parties Durant got in to subscribe to 2,000,000 of our Stock last fall and got out injunctions then for Durant in his fight against the Road. He now claims that Durant & Bardwell [a member of the Durant faction] agreed to pay him expenses and can't come up and he will now get what he can. He has served an injunction on [John J.] Cisco [the Union Pacific's treasurer] and will serve one on me if he gets a chance to tye [sic] up the Road and do every possible thing he can to annoy us and make us pay him a liberal sum to withdraw his suits.” Grenville M. Dodge Papers, Iowa State University Library (hereinafter cited as Dodge MSS).

28 Grodinsky, Jay Could, 71.

29 A detailed examination of the Fisk Raid is found in Merkel, “Origins,” 30–50.

30 Oliver Ames to Grenville M. Dodge, 26 July 1868, Dodge MSS.

31 Act of 27 July 1868, 15 Stat. 226 (1868).

32 Congressional Globe, 40th Cong., 2d sess., 1868, 3901.

33 15 Stat. 226 (1868).

34 Congressional Globe, 40th Cong., 2d sess., 1868, 4198.

35 Ibid. The “special object” was assisting the Union Pacific.

36 Poland Report, 105, 39.

37 Congressional Globe, 40th Cong., 2d sess., 1868, 4199. appendix, 562–63.

38 The inferior courts were the circuit and district courts. Act of 4 Sept. 1789, sees. 3–4. 1 Stat. 73 (1789), 73–75.

39 U.S. Const, art. 3, sec. 2. clause 1.

40 Frankfurter and Landis, Business, 12.

41 Act of 24 Sept. 1789, 1 Stat. 73(1789).

42 This genre of removal statutes first appeared in 1815 when New England merchants threatened to frustrate the Madison administration's policy restricting trade with belligerents. Congress passed an act prohibiting such intercourse and, anticipating harassment of federal customs officials in the state courts, authorized these officers to remove civil and criminal actions to the federal circuit courts. Act of 4 Feb. 1815, 3 Stat. 195 (1815). A similar scenario occurred during the Nullification Crisis of 1832–33. Congress stepped in to protect customs officials who were enforcing the Tariffs of 1828 and 1832 from state court prosecution. The Force Act of 1833 provided that civil and criminal actions against persons who were exercising duties as customs officers were removable to the federal courts. Act of 2 March 1833, 4 Stat. 632 (1833).

Congress passed removal statutes with increased frequency during the 1860s. This phenomenon reflected its determination that state courts would neither frustrate the war effort nor undermine its sweeping new civil rights program. In 1863, Congress passed the Habeas Corpus Act, which allowed federal officers or persons to remove to federal courts suits for wrongs done in furtherance of presidential or federal authority. Act of 3 March 1863, 12 Stat. 756 (1863). This legislation confirmed Lincoln's suspension of the writ of habeas corpus and was seen as a means of neutralizing actions that might be brought in state courts against those who administered national policies. When Congress passed its first income tax law, it took measures to assure the act would not be emasculated in the state courts. The Internal Revenue Act of 1866 provided that any state court case challenging the constitutionality of the law might be removed to federal court. Act of 13 July 1866. 14 Stat. 98 (1866). Likewise, in the civil rights area, members of Congress who promoted this new legislation were acuteiy aware that their revolutionary laws would find an unsympathetic reception in the courts of many states. For this reason, civil rights laws, beginning with the Act of 1866, authorized plaintiffs to transfer their cases to federal courts. Act of 9 April 1866, 14 Stat. 27 (1866). Kutter, Judicial Power, chap. 8.

43 Act of 10 April 1816, 3 Stat. 266, 269 (1816).

44 Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738 (1824).

45 See Kutler, Judicial Power, 147–48, for a discussion of these statutes.

46 Act of 10 April 1869, 16 Stat. 56 (1869).

47 Congressional Globe, 40th Cong., 2d sess., 1868, 4198.

48 Ibid, 4199.

49 Ibid., 4198. 4199.

50 9 F. Cas. 149 (C.C.S.C.N.Y. 1869) (No. 4827), 151–52. 154, 155.

51 Jonese v. Oceanic Steam Navigation Co., 13 F. Cas. 997 (C.C.S.D.N.Y. 1873) (no. 7,485).

52 Kain v. Texas and Pacific Railroad Co., 14 F. Cas. 77 (C.C.E.D. Tex. 1875) (no. 7,596).

53 15 Stat. 226 (1868).

54 16 F. Cas. 390 (C.C.D. Nev. 1873) (no. 8,945), 390–91.

55 24 F. Cas. 391 (C.C.D. Neb. 1875) (no. 14,273). Miller's decisions interpreting the Removal Act of 1868 are puzzling. The Turton opinion sanctioned removal. In Bauman v. Union Pacific Railroad Co., 2 F. Cas. 1043 (C.C.C.D. Neb. 1875) (no. 1,117), he held that a section of the railroad's charter authorized removal. See also Smith v. Union Pacific Railroad Co., 22 F. Cas. 694 (C.C.D. Neb. 1872) (no. 13,121). Yet Miller dissented with Chief Justice Waite in the Pacific Railroad Removal Cases, 115 U.S. 1, 24. Though the latter case turned on the removal provisions of the 1875 Act, which broadened the federal question jurisdiction of the U.S. Courts, the substantive issue was identical.

John F. Dillon, attorney for the railroads in the Pacific Railroad Removal Cases, took full advantage of Turton, despite Miller's change of heart. Record, “Argument Against Motion to Dismiss,” 35–38.

56 Freyer, Forums of Order, 118–19, n. 40; 111–12.

57 Henderson, Gerard Carl, The Position of Foreign Corporations in American Constitutional Law (Cambridge, Mass.; University Press, 1918)Google Scholar, chaps. 6 and 8.

58 Congressional Record, 43d Cong., 2d sess., 1874, 4979–88.

59 Ibid., 4984, 2169, 2240.

60 Ibid., 4986.

61 Ibid., 4987.

62 New York Times, 24 June 1874, 4.

63 115 U.S. 1 (1885).

64 Louisville. Cincinnati and Charleston Railroad Co. v. Letson. 43 U.S. (2 How.) 497 (1844).

65 Baltimore and Ohio Railroad Co. v. Koontz. 104 U.S. 5(1881).

66 Thompson, Seymour D., “Federal Jurisdiction in Case of Corporations: Proposed Act of Congress to Restore the Early Rule on the Subject,” American Law Review 29 (Nov.-Dec. 1895): 868–70.Google Scholar

67 Mills, Henry E., “Should Federal Courts Ignore State Laws?” American Law Review 34 (Jan.-Feb. 1900): 62–64.Google Scholar

68 Western Jurist 10 (April 1876): 203 (emphasis in original).

69 41 U.S. (16 Pet.) 1(1842).

70 4 Metc. 49, 57(1842).

71 112 U.S. 377, 395 (1884).

72 37 F. 189, 190(C.C.D. Col. 1889).

73 McKaig v. Northern Pacific Railroad Co., 42 F. 288 (C.C.D. Minn. 1889).

74 149 U.S. 368 (1893).

75 Little Miami Railroad v. Stevens, 20 Ohio 416 (1851). The U.S. Supreme Court had adopted the Little Miami rule in its 1884 Ross opinion, Ross, 112 U.S. at 392–94. By 1893 it had modified the rule.

76 Baugh, 149 U.S. at 389.

77 Ibid, at 378–79.

78 175 U.S. 323, 340 (1889).

79 Mills, “Federal Courts,” 52.

80 Shearman, Thomas G. and Redfield, Amasa A., A Treatise on the Law of Negligence, 5th ed. (New York, 1898). 448–53.Google Scholar