Fort Smith Light & Traction Co. v. Bourland

Background

A local transit company owned and ran a streetcar system with about 22 miles of track, including a one-third mile line on Greenwood Avenue. The company asked the city utility board for permission to abandon that short line because it lost money. The city planned to change the street grade and the company would have to relay tracks at an estimated $11,000. The Greenwood portion earned about $2.40 a day while costing $8.25 a day. The company’s total net earnings for 1922 were $16,000, about 1.7% of the property’s estimated value. The commission denied the abandonment, state courts refused to set aside that order, and the case reached the Court for review.

Reasoning

The Court considered whether the commission’s order to continue service was arbitrary or an unconstitutional taking of property. It held the order was not inherently arbitrary. A public utility cannot avoid duties it agreed to assume just because a part of its business loses money or needs costly repairs. Requiring continued operation of a loss-making branch is permitted, and the need to rebuild tracks does not make the order void. The company could not be forced to operate forever if it surrendered its franchise, but it could not keep the franchise and escape the responsibilities tied to it.

Real world impact

The ruling means cities can require transit companies to keep running unprofitable lines when the commission so orders, even if costly to repair or operate. Local riders keep service on that route. The company’s practical option is to give up the franchise entirely rather than selectively abandon parts of its system.