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Federal control of public utilities.

I. Introductory, 1680. II. Validity of measures for Federal

control: a. Acts of Congress, 1680. b. Joint Resolution of Congress,

1684. c. Presidential proclamations: 1. Proclamations of Decem

ber 26, 1917, 1685. 2. Proclamation of July 22,

1918, 1687. 3. Proclamation of Novem

ber 2, 1918, 1687. d. Orders of Director General of

Railroads : 1. Orders Nos. 18 and 18a,


II. d.-continued,

2. Order No. 26, 1694.

3. Order No. 50, 1695. III. Extent of Federal control, 1702. IV. Right of action by public utility,

1710. V. Right of action against public util.

ity, 1710. VI. Jurisdiction of action by or against

public utility, 1714. VII. Service of process, 1715. VIII. Removal of cause to Federal court,

1715. IX. Execution of process against public

utility, 1716.

cables on November 16, 1918, each naming the Postmaster General as the agent intrusted with such control. In the present note it is proposed to discuss the validity, interpretation, and effect of these acts, proclamations, and orders.

II. Validity of measures for Federal


1. Introductory. On the 29th of August, 1916, the Congress of the United States enacted a law (9 Fed. Stat. Anno. 2d ed. p. 1095) which empowered the President, in time of war, to take possession and assume control of any system or systems of transportation and utilize them for the transportation of troops and materials of war. Pursuant to this act, the President, on the 26th day of December, 1917, assumed control of the railroads of the United States and appointed William G. McAdoo, the then Secretary of the Treasury, and designated him to be the Director General of Railroads, under whose direction the control of the transportation systems was to be carried out. On March 21, 1918, a second act on the same subject was passed by Congress (Fed. Stat. Anno. Supp. 1918, p. 757), which in detail recited how the control so granted the President should be exercised. Certain general orders were issued by the Director General in the course of his administration. A joint resolution of Congress was passed on July 16, 1918 (Fed. Stat. Anno. Supp. 1918, p. 834), authorizing the President to take over and control the telephone, telegraph, and marine cable systems of the country. The authority thus granted was exercised by the President as to the telegraph and telephone companies by proclamation of July 22, 1918, and as to the marine

a. Acts of Congress. The Act of Congress of August 29, 1916, to which the President's proclamation assuming Federal control of railroads is referable, provides: "The President, in time of war, is empowered, through the Secretary of War, to take possession and assume control of any system or systems of transportation, or any part thereof, and to utilize the same, to the exclusion as far as may be necessary of all other traffic thereon, for the transfer or transportation of troops, war material and equipment, or for such other purposes connected with the emergency as may be needful or desirable." 39 Stat. at L. 645, chap. 418, Comp. Stat. § 1974 a, 9 Fed. Stat. Anno. 2d ed. p. 1095.

The act of Congress of March 21, 1918 (40 Stat. at L. 456, chap. 25, $ 10, Comp. Stat. § 31154 j, Fed. Stat. Anno. Supp. 1918, p. 762), provides in part as follows: “Carriers while under Federal control shall be subject to all laws and liabilities as common carriers, whether arising under state or

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Federal laws or at common law, ex- NORTHERN P. R. Co. (reported here-
cept in so far as may be inconsistent with) ante, 1659.
with the provisions of this act or any Thus it has been said: “The com-
other act applicable to such Federal plete and undivided character of the
control or with any order of the Presi- war power of the United States is not
dent. Actions at law or suits in equity disputable. Selective Draft Law
may be brought by and against such Cases (Arver v. United States) (1917)
carriers and judgments rendered as 245 U. S. 366, 62 L. ed. 349, L.R.A.
now provided by law; and in any ac- 1918C, 361, 38 Sup. Ct. Rep. 159, Ann.
tion at law or suit in equity against Cas. 1918B, 856; Ex parte Milligan
the carrier, no defense shall be made (1867) 4 Wall. (U. S.) 2, 18 L. ed. 281;
thereto upon the ground that the car- Legal Tender Cases (1871) 12 Wall.
rier is an instrumentality or agency of (U. S.) 457, 20 L. ed. 287; Stewart v.
the Federal government. Nor shall Kahn (Stewart v. Bloom) (1871) 11
any such carrier be entitled to have Wall. (U. S.) 493, 20 L. ed. 176. On the
transferred to any Federal court any face of the statutes it is manifest that
action heretofore or hereafter insti- they were in terms based upon the war
tuted by or against it, which action power, since the authority they gave
was not so transferable prior to the arose only because of the existence of
Federal control of such carrier; and war, and the right to exert such au-
any action which has heretofore been thority was to cease upon the war's
so transferred because of such Fed- termination. To interpret, therefore,
eral control or of any act of Congress the exercise of the power by the pre-
or official order or proclamation relat- sumption of a continuance of a state
ing thereto shall upon motion of either power limiting and controlling the
party be retransferred to the court in national authority, was but to deny
which it was originally instituted. its existence. It was akin to the con-
But no process, mesne or final, shall tention that the supreme right to raise
be levied against any property under armies and use them in case of war
such Federal control...; Nothing did not extend to directing where and
in this act shall be construed to when they should be used.” Northern
amend, repeal, impair, or affect the P. R. Co. v. North Dakota (1919) 250
existing laws or powers of the states U. S. 135, 63 L. ed. 897, P.U.R.1919D,
in relation to taxation or the lawful 705, 39 Sup. Ct. Rep. 505.
police regulations of the several

"The assumption of Federal control states, except wherein such laws, pow- was in effect a mobilization under one

head of the persons and corporations ers, or regulations may affect the transportation of troops, war mate

engaged in the business of transporrials, government supplies, or the is

tation as a means of meeting the emersue of stocks and bonds."

gencies imposed by a state of war. That Congress had authority in time

Viewed in this light, the as

sumption of control was without of war to enact the legislation placing

doubt within the power granted by the certain public utilities under Federal control is now generally conceded, and

Constitution to the Federal governthe constitutionality of the acts can

ment, and was an appropriate instrunot be seriously questioned. Northern

mentality for carrying into effect the P. R. Co. y. North Dakota (1919) 250

known powers of the government." U. S. 135, 63 L. ed. 897, P.U.R.

LAVALLE V. NORTHERN P. R. Co. (re1919D, 705, 39 Sup. Ct. Rep. 505;

ported herewith) ante, 1659. Nueces Valley Town-Site Co. v. Mc

Similarly in Vaughn State Adoo (1919) 257 Fed. 143; Dahn v.

(1919) — Ala. App. -, 81 So. 417, conMcAdoo (1919) 256 Fed. 549; Wain

struing the act of Congress approved wright v. Pennsylvania R. Co. (1918)

March 21, 1918, the court said: “There 253 Fed. 459; Vaughn v. State (1919)

can be no doubt that the same authorAla. App. —, 81 So. 417; West v. ity, inherent in the Federal governNew York, N. H. & H. R. Co. (1919) ment, through which it has called inMass.

- 123 N. E. 621; LAVALLE v. to its service under a system of selec4 A.L.R.–106.

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tive draft its citizen soldiery, may be passed on the constitutionality of the used to commandeer and mobilize its act of Congress approved March 21, corporate citizenship for the purpose 1918, and, confining its opinion to acof moving and supplying the Army tions instituted in the Federal courts, with the substances and material for said: “That Congress possesses the military operations.

And the power to enact legislation of this navalidity of this statute is sustainable ture, under the Constitution, cannot on no other theory than that the trans- be questioned at this day. There are portation companies are operating several grounds upon which it must their respective systems under Fed- be sustained. (1) In M'Culloch v. eral control. If such companies are Maryland (1819) 4 Wheat. (U. S.) 316, in no way connected with the operat- 421, 4 L. ed. 579, 605, Chief Justice ing systems, we submit that it would Marshall delivering the opinion of the not be within the power of Congress court, it was held as a proper canon to subject them to liability and suits of the interpretation of the powers of thereon for the torts, miscarriages, Congress under the national Constiand defaults of the employees of the tution, among others: 'Let the end be Federal government. Such an act legitimate, let it be within the scope would be an arbitrary exercise of leg- of the Constitution, and all means islative power, contrary to the estab- which are appropriate, which are lished principles of private rights and plainly adapted to that end, which are distributive justice, and tantamount not prohibited, but consist with the to a denial of due process of law. letter and spirit of the Constitution, Zeigler v. South & North Ala. R. Co. are constitutional.' This rule of con(1877) 58 Ala. 594; Mobile Light & struction has never been doubted or R. Co. v. S. D. Copeland & Son (1916) questioned by any subsequent deci15 Ala. App. 235, 73 So. 131; Bank of sion, but has been uniformly followed Columbia v. Okely (1819) 4 Wheat. (U. whenever it has been before the S.) 235, 4 L. ed. 559; Hurtado v. Cal- courts, and must therefore be accepted ifornia (1884) 110 U. S. 516, 28 L. ed. as elementary in the construction of 232, 4 Sup. Ct. Rep. 111, 292; Dent v. the national Constitution. That there West Virginia (1889) 129 U. S. 114, is nothing in the Constitution prohib32 L. ed. 623, 9 Sup. Ct. Rep. 231; iting Congress from determining the Leeper v. Texas (1891) 139 U. S. 462, venue in civil actions is beyond ques. 35 L. ed. 225, 11 Sup. Ct. Rep. 577; tion. Article 1, § 8, cl. 11, of the Con. Giozza v. Tiernan (1893) 148 U. S. 657, stitution, grants Congress the power 37 L. ed. 599, 13 Sup. Ct. Rep. 721; to declare war, and clause 12 of that Jones v. Brim (1897) 165 U. S. 180, section empowers it to raise and sup41 L. ed. 677, 17 Sup. Ct. Rep. 282; port armies. That, by virtue of these Maxwell v. Dow (1900) 176 U. S. 581, provisions of the Constitution, Con44 L. ed. 597, 20 Sup. Ct. Rep. 448, gress may use all means which are, 494; 6 R. C. L. pp. 433–446, embracing in its opinion, appropriate to the end, 11 430 to 442, on Constitutional Law. and not prohibited by some provision On the other hand, if the carriers are of the Constitution, has, under the operating under Federal control and rule established in M'Culloch v. Maryare agencies of the government, the land, been settled in Miller v. United authority of Congress to impose lia- States (Page v. United States) (1871) bility on the carriers for the torts of 11 Wall. (U. S.) 268, 20 L. ed. 135, and their employees is clearly sustainable Stewart v. Kahn (Stewart v. Bloom) on the theory that such responsibility (1871) 11 Wall. (U. S.) 493, 506, 507, encourages caution on the part of the 20 L. ed. 176, 179; reaffirmed in Maycarriers and their employees, pro- field v. Richards (1885) 115 U. S. 137, motes efficiency, and safeguards the 29 L. ed. 334, 5 Sup. Ct. Rep. 1187. interests of the government and the

See, also, the address of former general public."

Justice Hughes on the War Powers So, in Wainwright v. Pennsylvania under the Constitution, 42 Am. Bar R. Co. (1918) 253 Fed. 459, the court Asso. 232. Whether the exigencies ex

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isted when Congress enacted this stat- 3 L. ed. 259, and uniformly adhered to ute was for that body to determine, ever since. A late case in which this and cannot be questioned by the ruling is reaffirmed is Ex parte Wiscourts, if there is any substantial ner (1906) 203 U. S. 449, 455, 51 L. ground therefor. M'Culloch v. Mary- ed. 264, 266, 27 Sup. Ct. Rep. 150. land (U. S.) supra; Lottery Case That Congress may increase or dimin(Champion v. Ames) (1903) 188 U. S. ish their powers, or abolish them, is 321, 355, 47 L. ed. 492, 500, 23 Sup. Ct. beyond question. It has done so a Rep. 321, 13 Am. Crim. Rep. 561; MC- number of times. ... The contenDermott v. Wisconsin (1912) 228 U. S. tion that the statute is void, because 115, 128, 57 L. ed. 754, 764, 47 L.R.A. vesting administrative officers with (N.S.) 984, 33 Sup. Ct. Rep. 431, Ann. legislative discretion or power, is withCas. 1915A, 39. That there was sub- out merit. Selective Draft Law Cases stantial ground for the enactment of (Arver v. United States) (1917) 245 the statute requires no argument. The U.S. 366, 389, 62 L. ed. 349, 357, L.R.A. conditions so graphically described in 1918C, 361, 38 Sup. Ct. Rep. 159, Ann. the Legal Tender Cases (1871) 12 Cas. 1918B, 856. It is therefore clear Wall. (U. S.) 540, 20 L. ed. 308) pre- that the act

is within the vail now, and it will conduce to brev- power of Congress under the Constiity to refer to what was there said, tution." without quoting it in this opinion. In one case, however, the authority That the act was enacted under the of Congress to pass the Act of March war power is not only apparent from 21, 1918, has been challenged, and it its context, but it is expressly declared was held unconstitutional in so far in § 16 of the act 'to be emergency as it pertains to the maintenance of legislation, enacted to meet condi- actions and the recovery of judgments tions growing out of war;' and g 14 against carriers for damages sustained provides that the Federal control of by employees and others while the railroads shall continue not exceeding railroad is being operated by and unone year and nine months after the der the direction of the Federal auratification of the Treaty of Peace.' thorities. Schumacher v. Pennsyl(2) Another ground upon which the vania R. Co. (1919) 106 Misc. 564, 175 act must be sustained is that the right N. Y. Supp. 84. In that case the court, to maintain an action in any particu- in support of its decision, said: “The lar court is always subject to the leg- Federal government, in the control islative will. It is only when one is and operation of the railroad properdeprived of all rights to maintain an ties taken over, is in no sense the action for the redress of his wrongs

agent or representative of the railthat the statute would be obnoxious to

road companies to whom the systems the 5th Amendment to the Constitu

belong. By the 12th section of the act tion. Congress has uniformly exer

the moneys and other property decised that power by providing in what

rived from the operation of the carcourts suits may be maintained, and in

riers during Federal control are deno instance has such an act been held

clared to be the property of the United void. Another ground upon

States. If a profit is realized from which this provision of the act must

such operation, the profit belongs to be upheld is that the courts of the

the United States. By § 8 the PresiUnited States, inferior to the Supreme

dent is given power to exercise the Court, are not established by the Con

powers granted him with relation to stitution, but owe their existence and Federal control through such agenpowers to Congress alone. That they cies as he may determine, and may fix possess no powers not granted by an

the reasonable compensation for the act of Congress was determined as performance of services in connection early as 1809 in Bank of United States therewith. In other words, the cus v. Deveaux, 5 Cranch (U. S.) 61, 3

eral government, in the operation of L. ed. 38, and again in 1812 in United the systems taken over, acts as the States v. Hudson, 7 Cranch (U. S.) 32, principal, and not as the agent of the

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owners of the transportation system, to pay the judgment thus sought to be becoming a lessee of the railroad on entered, it would undoubtedly have a terms agreed upon between it and the just demand against the government companies. Where no agreements as

to be reimbursed for moneys so paid; to rentals are reached, and where no but the fact that such a demand exists such formal leases are entered into, in no way cures the statute of the inthe government is to pay such a rent- firmity of unconstitutionality. The al as may be thereafter determined taking of the property of one to pay reasonable and just by and in the the debt of another is none the less methods prescribed. In short, the re- illegal, even though the party wronged lation between the government and may assert his right for compensation. the carrier is nothing more or less The condemnation is against the ilthan that of lessor and lessee; the legal taking, and the violation of this lessee operating the road for itself constitutional guaranty is not cured and on its own account. The employ- by the possibility of future restituees engaged in operating the various tion.

We can reach no other systems are, for the time being, at conclusion than that the Act of least, the government's servants and March 21, 1918, in so far as it authoragents, subject to its directions, paid ized judgments against carrier corby the government, and subject to dis- porations for the default or liabilities missal by it.

If our view and of the government, violates the Fedconstruction of the statute in question eral Constitution, providing against are correct, we are face to face with the taking of private property 'withthe legal question whether, in so far out due process of law.'" as it authorizes actions and judgments

b. Joint Resolution of Congress. against carriers for the negligence or default of the government or its

The Joint Resolution of Congress,

passed July 16, 1918, provided as fol. agents, such provisions are constitu

lows: "That the President, during tional and valid. To state the ques

the continuance of the present war, is tion is to answer it. We can reach no other conclusion than that in that re

authorized and empowered, whenever

he shall deem it necessary for the naspect Congress has exceeded its constitutional powers.

It is repugnant

tional security or defense, to superto the great underlying principles of

vise or to take possession and assume

control of any telegraph, telephone, our jurisprudence, and violates, we think, the express provisions of the

marine cable, or radio system or sys5th Amendment to the Federal Con

tems, or any part thereof, and to oper

ate the same in such manner as may stitution, declaring: 'No person shall

be needful or desirable for the durabe

deprived of life, liberty, or property, without due process of

tion of the war, which supervision, law; nor shall private property be

possession, control, or operation shall taken for public use without just

not extend beyond the date of the compensation.' Certainly the taking

proclamation by the President of the of the property of a corporation to

exchange of ratifications of the Treaty

of Peace: . Provided further, pay the debt or liability of the government, for which the corporation

That nothing in this act shall be con

strued to amend, repeal, impair, or afis in no way responsible, violates this

fect existing laws or powers of the provision of the Constitution, and de

states in relation to taxation or the prives it of the equal protection of the

lawful police regulations of the sevlaw. It probably was the intention

eral states, except wherein such laws, of the framers of the statute that the

powers, or regulations may affect the government should ultimately pay all

transmission of government communsuch demands as in justice and by

ications, or the issue of stocks and right it should. It is impossible to be

bonds by such system or systems." lieve that the contrary was in their This Joint Resolution of Congress minds, but the statute nowhere so pro- has been declared constitutional by vides. If the carrier were compelled the Supreme Court of the United

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