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The Minnesota Rate Cases

Supreme Court of the United States · 1913 · Constitutional Law

Constitutional LawCommerce ClauseDue ProcessState Rate Regulationintrastate ratesinterstate commercedirect burdenindirect effect

Facts

Minnesota adopted orders and statutes fixing maximum intrastate class freight rates, passenger fares, commodity rates, and certain in-rates for designated commodities. The railroads argued that although the measures applied only to intrastate traffic, they would force reductions in interstate rates and create discrimination against out-of-state localities, and also that the rates were confiscatory. The railroads' interstate and intrastate traffic moved over the same systems, but the state measures by their terms regulated only transportation wholly within Minnesota. During the litigation, most of the challenged rates except the commodity rates went into effect, and extensive valuation and earnings evidence was taken before a special master.

Issue

Whether Minnesota's intrastate railroad rates were invalid because they directly burdened interstate commerce or conflicted with the Act to Regulate Commerce, and whether the prescribed rates were confiscatory in violation of due process. Also, whether the evidentiary methods used to prove confiscation were sufficient.

Rule

A State retains authority to fix reasonable rates for transportation wholly within its borders unless and until Congress, by actual exercise of its paramount commerce power, displaces that authority; indirect effects on interstate commerce do not alone make such rates unconstitutional. A confiscation challenge requires proof of the fair value of the property used in intrastate business and the fair return allowed on that property, with valuation based on proper evidence rather than speculative 'railway value,' and with actual depreciation and proper apportionment considered.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

The Colorado Public Carriage Board sets maximum freight rates for shipments that begin and end within Colorado. A regional railroad operating through Denver and Cheyenne shows that, to keep border shippers from rerouting traffic, it will likely reduce some interstate rates between Wyoming and Colorado as a practical response.

Is the Colorado order invalid under the Commerce Clause solely because it will likely induce the railroad to lower some interstate rates?

Explanation. The controlling rule is that a state retains authority to prescribe reasonable maximum rates for transportation wholly within its borders, and indirect or practical effects on interstate commerce do not alone make the regulation unconstitutional. The majority distinguished a direct burden on interstate commerce from a state rule governing only internal traffic that merely influences interstate pricing decisions at competitive border points.