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What Have Lawyers Done For American Business? The Case of Baker & Botts of Houston

Published online by Cambridge University Press:  13 December 2011

Kenneth Lipartito
Kenneth Lipartito
Affiliation:
Kenneth Lipartito is associate professor of history at the University of Houston.
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Abstract

Although lawyers made crucial contributions to the development of business, scholars have said little about their role. As the following article explains, lawyers fought restrictions on business growth, worked to make laws uniform, and helped to establish legal rules in the areas of corporate reorganization, finance, and regulation. Pioneering a new type of organization—the large firm—they moved beyond the realm of legal doctrine and acquired the political influence, local knowledge, and community connections needed to reform the nation's decentralized legal system in ways that fit the demands of national-scale business.

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Articles
Information
Business History Review , Volume 64 , Issue 3: Service Industries , Autumn 1990 , pp. 489 - 526
Copyright
Copyright © The President and Fellows of Harvard College 1990

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References

1 Throughout, the terms corporate lawyer and corporate law firm will be used to describe those lawyers and their organizations devoted primarily to the service of private corporations and other forms of big business. The term is somewhat inaccurate in that it implies that these lawyers worked exclusively in the area of corporate law, when in fact their work included finance, product liability, tax, patents, and other legal areas relevant to business.

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20 For an excellent example, see McCurdy, Charles, “American Law and the Marketing Structure of the Large Corporation, 1875–1890,” Journal of Economic History 38 (Sept. 1978): 631–49CrossRefGoogle Scholar.

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26 There are still other areas in which lawyers were important: many served as managers of companies, others as regulators. In all areas of litigation, lawyers' monopoly over courtroom representation obviously made them important actors. They also often served as key industry representatives and trade group advocates, a position they could occupy better than could heads of individual firms. I am grateful to David Sicilia for this last suggestion.

27 See for example, Lisagor, Nancy and Lipsius, Frank, A Law Unto Itself: The Untold Story of the Law Firm of Sullivan & Cromwell (New York, 1988), 36–37Google Scholar, 60.

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30 See Swaine, , The Cravath Firm, 1: 502–10Google Scholar for an interesting example.

31 Gordon, “Legal Thought and Legal Practice,” 100–110, provides, a detailed discussion of reorganizations; Martin, Albro, “Railroads and the Equity Receivership: An Essay on Institutional Change,” Journal of Economic History 34 (Sept. 1974): 685–709CrossRefGoogle Scholar.

32 Gordon, “Legal Thought and Legal Practice,” 104–6; Martin, “Railroads and the Equity Receivership”; James Byrne, “The Foreclosure of Railroad Mortgages in the United States Courts,” and Cravath, “The Reorganization of Corporations,” 77–234.

33 Scheiber, “Federalism, the Southern Regional Economy and Public Policy,” 77–80.

34 Texas Constitution, Article X, sec. 5 (1876); 1889 Texas General Laws, 141, Act of March 30, 1881, ch. 117; 1903 Texas General Laws, 119, act of 1903, ch. 94; Autry, James, “The Business Corporation of Texas—Its Formation if Domestic; Its Admission if Foreign,” Proceedings of the 19th Annual Session of the Texas Bar Association (Austin, Texas, 1900), 111–12Google Scholar, Miller, Edmund T., “The Texas Stock and Bond Law and Its Administration,” Quarterly Journal of Economics 22 (Nov. 1907): 109–19CrossRefGoogle Scholar.

35 Francis Lynde Stetson, “Preparation of Corporate Bond, Mortgages, Collateral Trusts, and Debentures, “ in Stetson, et al., Some Legal Phases of Corporate Financing, 4.

36 Cravath, “The Reorganization of Corporations,” 187.

37 For more on the firm, see Lipartito, Kenneth and Pratt, Joseph, Baker & Botts in the Development of Modern Houston (Austin, Texas, 1991)Google Scholar.

38 Baker & Botts Law Firm Historical Collection, Rice University, Woodson Research Center [hereafter BBHC], Southern Pacific Files [hereafter SP], 23:1, Minutes of the Galveston, Houston and San Antonio Railroad (GH&SA), 5 March 1910, SP File 2:7, 1905 Consolidation Act.

39 BBHC, SP File 21:1, R. S. Lovett to Baker & Botts, 16 June 1910; Lovett to Baker & Botts, 23 June 1910.

40 Hubbard vs. GH&SA, et al., 200 Fed. 504–11; BBHC, SP File 21:1, R. S. Lovett to Baker & Botts, 23 June 1910; Baker & Botts to R. S. Lovett, 1 Sept. 1910; SP File 20:2, E. B. Parker to H. M. Garwood, 19 June 1910. These suits were a common nuisance and were filed by “professional obstructors” to extort payment from reorganizing corporations. Cravath, “The Reorganization of Corporations,” 202–3.

41 BBHC, SP File 25:3, E. B. Parker to Joseph Bryson, 14 Oct. 1911.

42 Beyond handling the technical issues of consolidation, lawyers also carried on the negotiations that created cartels and trusts, though their work in formal mergers was perhaps more significant, given the importance of this form of combination in American business history.

43 BBHC, Office Review, 26 March 1925, 119–25; 13 Dec. 1928, 209–11; 23 Feb. 1928, 50–51; 13 Jan. 1937, 2–3; 24 Jan. 1934, 32–33; 16 Dec. 1936, 238–59.

44 BBHC, Office Review, 7 Oct. 1926, 296–97. Gulf States Utility Company, Beaumont, Texas, Minutes [hereafter GSUM], 26 Aug. 1925; 15 Sept. 1926; 21 Aug. 1925; 16 Nov. 1926.

45 For a discussion of the important advantages that lawyers hold over others in politics, see Paul Hair and Piereson, James, “Lawyers and Politics Revisited: Structural Advantages of Lawyer-Politicians,” American Journal of Political Science 19 (Feb. 1975): 41–51Google Scholar.

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47 Keller, “Regulation of Large Enterprise,” 166–70. See also Skowronek, Stephen, Building a New American State: The Expansion of National Administrative Capacities, 1877–1920 (New York, 1982)CrossRefGoogle Scholar.

48 In private, in their professional associations, and in their capacity as regulators themselves, on the other hand, these same lawyers were often much more accepting of administrative innovations. For a fascinating study of the role of the professional legal association in politics, see Halliday, Terence, Beyond Monopoly (Chicago, III., 1987)Google Scholar. The legal professional association as a political force—a subject beyond the scope of this article—deserves more historical study.

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50 Swaine, The Cravath Firm, 1: 710–15.

51 Friedman, History, 439–66; Bickel, Alexander and Schmidt, Benno C. Jr., The Judiciary and Responsible Government, 1910–1921 (New York, 1984), 213–76Google Scholar.

52 Sklar, The Corporate Reconstruction of American Capitalism, 86–175; Thorelli, Hans, The Federal Antitrust Policy (Baltimore, Md., 1955), 257–65Google Scholar.

53 May, “Antitrust Practice and Procedure in the Formative Era,” 495–593; May, James, “Antitrust in the Formative Era: Political and Economic Theory in Constitutional and Antitrust Analysis, 1880–1918,” Ohio State Law Journal 50 (1989): 255–395Google Scholar; Libecap, Gary, “The Political Economy of United States Crude Oil Cartelization, 1933–72,” Journal of Economic History 49 (Dec. 1989): 848–51CrossRefGoogle Scholar; Scheiber, “Federalism, the Southern Regional Economy, and Public Policy,” 74–93. Contrast Bringhurst, Bruce, Antitrust and the Oil Monopoly: The Standard Oil Cases, 1890–1911 (Westport, Conn., 1979), 52–54Google Scholar; and McCurdy, “The Knight Sugar Decision,” 306–7.

54 McCurdy, “The Knight Sugar Decision,” 331–32, 336–38.

55 Pratt, Joseph and Steiner, Mark, “‘An Intent to Terrify’: State Antitrust Law in the Formative Years of the Modern Oil Industry,” Washburn Law Review 29 (1990): 270–89Google Scholar. The authors note that the threat of prosecution was often enough to change business practices. See also Pratt, Joseph, “The Petroleum Industry in Transition: Antitrust and the Decline of Monopoly Control in Oil,” Journal of Economic History 40 (Dec. 1980): 815–37CrossRefGoogle Scholar. Chudleigh, Norma, “The Life of James L. Autry, Jr.: Hero without War” (Ph.D. diss., University of Houston, 1990Google Scholar) notes the vital role played by lawyers in the early years of Texaco.

56 Urofsky, “State Courts,” 69.

57 Pratt and Steiner, “‘Intent to Terrify,’” 276–77; Friedman, History, 341; Hovenkamp, “Regulatory Conflict in the Gilded Age,” 1034. Hovenkamp disputes the idea that states had effective power over interstate manufacturers. But the reasons he cites show that corporations made effective use of their lawyers to find ways around state laws, the thesis of this article. See also Bringhurst, Antitrust and the Oil Monopoly, 1–107; examples here also show how corporate attorneys frustrated state laws.

58 Lipartito, Kenneth, “Getting Down to Cases: Baker & Botts and the Texas Railroad Commission,” Essays in Economic and Business History 6 (1988): 27–36Google Scholar. Reagan v. Farmer's Loan and Trust Company, 154 U.S. 362. The court spoke again in 1898 in Smyth v. Ames, where it adduced the criterion of fair return on a fair value of property to its earlier ruling. This decision reinforced the leverage of corporations against rate-making bodies; 169 U.S. 540.

59 Houston Daily Post, 8 Feb. 1905; 21 Oct. 1904, 8. This did not always work; see 27 Nov. 1904, 11.

60 This point is also made by Pratt and Steiner, “‘An Intent to Terrify,’” 278–79, with respect to the oil industry.

61 Houston Chronicle, 1 Nov. 1907.

62 On the local market and local attorneys, see Freyer, “Economic Liberty, Antitrust, and the Constitution,” 187–216.

63 Platt, Harold, City Building in the New South: The Growth of Public Services in Houston, Texas, 1830–1915 (Philadelphia, Pa., 1983), 157–64Google Scholar.

64 Houston City Council Minute Books (hereafter CCMB), 20 Oct., 15 Dec. 1902.

63 BBHC, Office Review, 26 Nov. 1946, 240–41.

66 Platt, City Building, 140–62. Some of the political controversies are discussed in the Houston Daily Post, 2 Oct. 1900, 6; 23 Oct. 1900, 6; 7 Nov. 1901, 6; 24 Jan. 1902, 6; 16 Feb. 1902, 14.

67 BBHC, Office Review, 12 March 1920, 57–58.

68 Millie Budd, “The Light Company,” 103–4, unpub. MS, copy in BBHC; BBHC, Office Review, 13 Nov. 1930, 77–79.

69 Others have also suggested that lawyers were successful when they could use their professional status to appear objective. See Swainger, Jonathan, “Ideology, Social Capital and Entrepreneurship: Lawyers and Business in Red Deer, Alberta, 1900–1920,” in Beyond the Law: Lawyers and Business in Canada, 1830 to 1930, ed. Wilton, Carol (Toronto, Ont., 1990), 391Google Scholar.

70 BBHC, Houston Lighting & Power Company Files, Garwood to Wharton, 27 June 1929.

71 BBHC, Office Review, 24 March 1927, 113–16.

72 Horwitz, Morton, “The Doctrine of Objective Causation,” in The Politics of Law: A Progressive Critique, ed. Kairys, David (New York, 1982), 201–11Google Scholar.

73 Friedman, History, 484; Urofsky, “State Courts,” 84.

74 Edwin Parker, “Anti-Railroad Personal Injury Litigation,” Houston Daily Post, 30 Sept. 1900.

75 Ibid.; also BBHC, Office Review, 10 May 1923, 209.

76 Quoted in Parker, “Anti-Railroad.”

77 Auerbach, Jerold, Unequal Justice: Lawyers and Social Change in Modern America (New York, 1976), 40–52Google Scholar.

78 BBHC, SP File 7:1, Parker to Garrett, 12 Dec. 1913; see also SP File 5:1, Kemp to Parker, 7 Sept. 1914.

79 BBHC, SP File 7:3, Baker & Botts to Bowers, 18 July 1912.

80 BBHC, SP File 7:1, Baker & Botts to Garrett, 14 July 1903; SP File 6:5, Baker & Botts to Kelly, 19 Dec. 1902; Parker to Kelly, 9 March 1909.

81 BBHC, SP File 5:4, Garrett to Baker & Botts, 24 March 1904; Baker & Botts to de Montel, 26 March 1904.

82 BBHC, SP File 7:1, Parker to Garrett, 6 Dec. 1913.

83 BBHC, SP File 6:3, Baker & Botts to Proctor, 4 Feb. 1904. Atone point, for example, Baker & Botts became involved in the choice of a new partner for the SP's El Paso district lawyer.

84 Skowronek, Building a New American State, 122–23, 248. It is also worth noting that lawyers representing private parties remain an important partof the public policy apparatus, despite the growth of administrative agencies. Skowronek sees the 1920 Transportation Act as representing the triumph of the modern state. For a good discussion of the limits of this law, and the ICC generally, see Hoogenboom, Ari and Hoogenboom, Olive, A History of the ICC: From Panacea to Palliative (New York, 1976)Google Scholar.

85 Lawyers also tended to be articulate, educated, and persistentof place, qualities that would have helped make them well entrenched in elite networks. Elizabeth Bloomfield, “Lawyers as Members of Urban Business Elites in Southern Ontario, 1860–1920,” in Wilton, Beyond the Law, 123–32.

86 Carol Wilton, “Introduction,” in ibid., 5.

87 Henry Klassen, “Lawyers, Finance, and Economic Development in Southwest Alberta, 1884–1920,” in ibid., 298–319.

88 Gordon Bakker, “Industrialization and the Nineteenth Century California Bar,” in Gawalt, The New High Priests, 135–37.

89 For information on the Rice Trust, see BBHC, Personal Files, Captain James A. Baker; and Rice University, Minutes of the Board of Trustees.

90 Buenger, Walter and Pratt, Joseph, But Also Good Business: Texas Commerce Banks and the Financing of Houston and Texas, 1886–1986 (College Station, Texas, 1986), 44–63Google Scholar.

91 BBHC, Office Review, 30 April 1930, 29–35; 24 Jan. 1934, 32–33; 31 March 1949, appendix.

92 Marchildon, Gregory, “The Role of Lawyers in Corporate Promotion and Management: A Canadian Case Study and Theoretical Speculations,’ Business and Economic History 2d ser., 19 (1990): 193–202Google Scholar. This article provides information on lawyers in Canada who went a step farther and organized their own underwriting syndicate.

93 Stratification is discussed extensively in Heinz, John P. and Laumann, Edward O., Chicago Lawyers: The Social Structure of the Bar (New York, 1982)Google Scholar.

94 Auerbach, Unequal Justice, 20–39.

95 Frederick M. Eaton, Sherman & Sterling (privately printed, 1973), 173; Swaine, The Cravath Firm, 2:315.

96 Goetsch, Charles and Shivers, Margaret, eds., The Autobiography of Thomas L. Chadbourne (New York, 1985), 100–105Google Scholar.

97 Ibid., 105–8.

98 Similar opportunities came to other New York lawyers. William Nelson Cromwell invested his own funds to help get the First Boston Corporation on its feet and had insider opportunities to purchase stock in United States Steel for his work on the organization of the corporation. Lisagor and Lipsius, A Law Unto Itself, 34–35, 111. When money had to flow to distant lands as well, lawyers were often the ones to get it there securely. For examples, see Swaine, The Cravath Firm, 1: 735–36; and Greg Marchildon, “International Corporate Law from a Maritime Base: The Halifax Firm of Harris, Henry and Cahan,” in Wilton, Beyond the Law, 201–34.

99 Wayne K. Hobson, “Symbol of the New Profession: Emergence of the Large Law Firm, 1870–1915,” in Gawalt, The New High Priests, 6.

100 Pinansky, Thomas, “The Emergence of Law Firms in the American Legal Profession,” UALR Law Review 9 (1986–1987): 598–602Google Scholar; Eaton, Sherman & Sterling, 128–29. For an example of how these forces affected corporate law firms in Canada, see Curtis Cole, “McCarthy, Osier, Hoskin and Creelman, 1882–1902: Establishing a Reputation, Building a Practice,” in Wilton, Beyond the Law, 149–66.

101 On instrumentalism in the law generally, see Horwitz, Transformation, 1–30; also Friedman, History, 29, 644, 635; Wilton, “Introduction,” 29–32. Recent studies show that today as well, lawyers in large corporate law firms accommodate professional ideas to the demands of clients. Nelson, Robert L., Partners with Power: The Social Transformation of the Large Law Firm (Berkeley, Calif., 1988), 268–69, 274–77Google Scholar.

102 Pinansky, “The Emergence of Large Law Firms,” 625–26; Strong, Theron J., Landmarks of a Lawyer's Lifetime (New York, 1914), 348–49Google Scholar. Lawyers were also motivated to change by the loss of traditional work in land conveyances, title investigations, and debt collections to title, mortgage, insurance, and estate management companies. Robert Nelson points out that lawyers have not been deskilled as other skilled workers have. Nelson, Partners with Power, 171. On corporate lawyers' incomes, see Gerard Gawalt, “The Impact of Industrialization on the Legal Profession in Massachusetts, 1870–1900,” in his The New High Priests, 98. We should be wary of ascribing the decision to organize law firms to an idealistic commitment to professional autonomy and independence. See Gordon, Robert, “The Independence of Lawyers,” Boston University Law Review 68 (Jan. 1988): 1–83Google Scholar.

103 Hobson, “Symbol,” 7.

104 On the different definitions of client interest, see Gordon, “Independence,” 24–30.

105 Galanter, Marc, “Why the ‘Haves’ Come Out Ahead: Speculations on the Limits of Legal Change,” Law and Society Review 9 (Fall 1974): 114–19CrossRefGoogle Scholar, suggests why loyalty and ongoing representation are important to clients. On the early stratification of the legal profession, see Hobson, Wayne K., The American Legal Profession and the Organizational Society, 1890–1930 (New York, 1986), 216–39Google Scholar; and Auerbach, Jerold, “From Rags to Robes: The Legal Profession, Social Mobility, and the American Jewish Experience,” American Jewish Historical Quarterly 66 (Dec. 1976): 251Google Scholar. Having cultivated a market position in serving corporations, mostof these lawyers were reluctant to endanger it by representing those atodds with corporations. Lawyers enjoy less autonomy from clients than perhaps any other profession. See Nelson, Partners with Power, 56, 248–60; and Heinz and Laumann, Chicago Lawyers, 166. Corporate lawyers also tend to be more closely tied to their clients, and less autonomous, than solo practitioners who work with individuals and small business. This split defines specialization in the law more than functional departments within the corporate law firms. Abel, Richard, American Lawyers (Oxford, England, 1989), 202–3Google Scholar.

106 Quoted in Swaine, The Cravath Firm, 1:710.

107 Outside law firms could also more easily than inside counsel limit the amountof information about their clients available to the public through the claim of attorney-client privilege. This privilege applies only to legal matters, not to the general business advice corporate lawyers often provided to their clients. It probably would have been much harder for lawyer-employees to persuade courts to accept their work as confidential than it was for lawyers in law firms. Pinansky, “The Emergence of Large Law Firms,” 631–32.

108 A point made by Hobson, The American Legal Profession, 103, 142–44. Nelson, Partners with Power, 220–27 places more emphasis on the ideology of professionalism, which allows firms what independence they do have.

109 For an example of how client interests are subverted by lawyers who are engaged only once by a client (who cannot afford to pay top dollar), see Blumberg, Abraham S., “The Practice of Law as a Confidence Game: Organizational Cooptation of a Profession,” Law and Society Review 1 (June 1967): 15–40CrossRefGoogle Scholar. See also Galanter, “Why the ‘Haves’ Come Out Ahead,” 114–19.

110 Chandler, Alfred D. Jr., Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge, Mass., 1990), 21–32Google Scholar. The best comparison for law firms is found in Chandler's discussion of industrial research laboratories. On the economics of law firms, see Rosen, Robert, “The Inside Counsel Movement, Professional Judgement and Organizational Representation,” Indiana Law Journal 64 (Summer 1989): 503–25Google Scholar.

111 Pinansky, “The Emergence of Large Law Firms,” 629–30. Pinansky calls this the “commodity of experience.”

112 Hurst, The Growth of American Law, 308. One should not take this economic argument too far. For a critique, see Nelson, Partners with Power, 62–69. If sharing costs were all that mattered, this could be done without formal partnership. See Abel, American Lawyers, 184.

113 Depending heavily on demand for this sortof custom work to survive, law firms have watched over their client lists carefully. Only those customers requiring this sortof special attention provided the fees and challenging work needed to attract top-flight new lawyers and hold on to mature ones. As early as 1927, the Houston firm of Baker & Botts made it quite clear in its professional listings that “small claims [were] not desired.” Similar considerations in recent years have induced big Wall Street law firms to send much routine lending work for commercial banks in-house. With multimillion-dollar loans for construction and bond indentures fairly routine and safe in the post-SEC financial world, aggressive law firms have soughtother, more exotic areas of practice, such as mergers and acquisitions.

114 Stevens, Robert, “Two Cheers for 1870: The American Law School,” in Law in American History, ed. Fleming, Donald and Bailyn, Bernard (Boston, Mass., 1971), 436, 469, 481–92Google Scholar; Gordon, “Legal Thought and Legal Practice,” 81–100; Gawalt, “The Impactof Industrialization,” 106–10; Bloomfield, Maxwell, “Law: The Development of a Profession,” in The Professions in American History, ed. Hatch, Nathan O. (Notre Dame, Ind., 1988), 44–45Google Scholar.

115 Abel, American Lawyers, 138–39, 185, 215. Expertise is reflected in two recent trends: the growth of law clinics such as Hyatt Legal Services (for non-corporate law) and the emergence of smaller “boutique” law firms specializing in areas such as tax law, international trade, and litigation (for the corporate sector).

116 See Stewart, James, The Partners: Inside America's Most Powerful Law Firms (New York, 1983), 114–51Google Scholar. Recent studies of Washington lawyers suggest that the power broker and the lobbyist have given way to the specialized expert who manipulates procedure in highly legalistic areas of regulation. Nelson, Robert L. and Heinz, John P., withedward Laumann and Robert Salisbury, “Lawyers and the Structure of Influence in Washington,” Law and Society Review 22 (1988): 260–61, 293–95CrossRefGoogle Scholar. There is also some feeling that specialization and expertise have obviated the lawyer's old role of general business advisor, though this change may be exaggerated. See Rosen, Robert, “Lawyers in Corporate Decision-Making” (Ph.D. diss., University of California, Berkeley, 1984), 14–15Google Scholar, 42–43.

117 Parrish, Michael, Securities Regulation and the New Deal (New Haven, Conn., 1970), 190–227Google Scholar.

118 Although branching suggests the greater fungibility of legal talent, law firms have not become like big accounting firms. On the growth of branching, see Abel, American Lawyers, 188–190, and, on changing needs, 98–99, 105–6, 116–17, 192–94.

119 On lawyers' contributions to legal uniformity and standardization, see Hurst, The Growth of American Law, 71–72, 276, 290–91, 363; also Friedman, History, 660.

120 Scheiber, “American Federalism and the Diffusion of Power,” 649–76.

121 House counsel, only 3 percentof all lawyers in 1948, grew to 14 percent by 1980, but the real loss was in solo practitioners, who declined from 56 to 33 percent in the same years. Pinansky, “The Emergence of Large Law Firms,” 638; also Rosen, “The Inside Counsel Movement,” 503–25.

122 Nelson, Partners with Power, 66–69, 181–85, 274–75; textured is his term. Law firms themselves, correspondingly, remain only “quasi-bureaucratic” and partly specialized. Hobson, The American Legal Profession, 156–59, also finds that historically firms were “underbureaucratized,” though he ascribes this to anti-commercial professional values.

123 Ritzer, George, “Professionalism, Bureaucratization, and Rationalization: The Views of Max Weber,” Social Forces 53 (June 1975): 627–33CrossRefGoogle Scholar; Weber, Max Weber on Law, 228–29, 267–68, 277–78. This view also runs against Parsonian theory, which portrays lawyers as mediators between the state and private business. Parsons, Talcott, Essays in Sociological Theory (Glencoe, III., 1954), 381–84Google Scholar. Hobson, The American Legal Profession, 44–45, 67, 72, 246–48, 436–41, takes note of this failure, but ascribes it to the ideological leanings of lawyers.

124 University training did notovercome lawyers' dependence on clients, because in America the law school has been mainly a trade school for practitioners. Stevens, “Two Cheers,” 537, 540. Smigel, Erwin O., The Wall Strut Lawyer (Bloomington, Ind., 1969)Google Scholar, contends that lawyers are successful at maintaining their independence.

123 Lawrence Friedman, “On Legalistic Reasoning—A Footnote to Weber,” Wisconsin Law Review (Winter 1966), 158–65, critiques Weber's emphasis on the growth of formal legal rationalism; in Weber, Max Weber on Law, 282, 315–16, Weber appears to recognize this problem.

126 Libecap, “Political Economy,” 848–55; Constant, Edward W. II, “Cause or Consequence: Science, Technology and Regulatory Change in the Oil Business in Texas, 1930–1975,” Techology and Culture 30 (April 1979): 426–55Google Scholar.

127 Texoma Natural Gas vs. Railroad Commission of Texas, 59 Fed (2d ser.) 750; BBHC, Office Review, 10 Dec. 1931, 178–79. This strategic maneuvering via the law is reminiscentof the way in which new firms in the telecommunications industry recently took advantage of legal and regulatory change to carve out protected market niches for themselves while AT&T underwent reorganization. Peter Temin, with Louis Galambos, The Fall of the Bell System (New York, 1987), 47–52Google Scholar.

128 Urofsky, Melvin, “Proposed Federal Incorporation in the Progressive Era,” American Journal of Legal History 26 (April 1982): 160–83CrossRefGoogle Scholar; see also Sklar, Corporate Reconstruction, 284; Kolko, , Triumph of Conservatism, 64, 177, 256–57Google Scholar.

129 For more on this case—involving the so-called Shreveport Doctrine—see Reed, S. G., A History of Texas Railroads (Houston, Texas, 1941), 622–40Google Scholar. The same Texas railroads that fought state antitrust laws prohibiting consolidations of separate lines also argued against a proposal of the Texas Railroad Commission to treat these lines as a single entity for ratemaking purposes. In this case, both the state and the railroads were using the law strategically. Houston Daily Post, 19 June 1902, 8; 21 May 1902, 8. Bickel and Schmidt, The Judiciary and Responsible Government, 216–21, 232–42, 254–64, provide other examples; also Hovenkamp, “Regulatory Conflict,” 1068–70.

130 Lipartito, “Getting Down to Cases,” 34–35. See also Martin, Albro, Enterprise Denied: Oryins of the Decline of American Railroads, 1897–1917 (New York, 1971)Google Scholar. Weber believed that formalism and practical business needs would conflict, but he did not anticipate business itself encouraging legal formalism for its own purposes. Weber, Max Weber on Law, 278–79, 307–8.

131 The idea of interpretation is derived from Dworkin, Ronald, Law's Empire (Cambridge, Mass., 1986)Google Scholar.

132 Hurst, Legitimacy, 58–59, 108. Utility and responsibility were the animating ideas behind legitimacy in Hurst's view.