Great Northern Railway Co. v. Washington

1937-02-01

Headline: Court reverses Washington’s ruling, requiring the State to prove utility fees do not exceed actual regulatory costs before keeping pooled fees, protecting railroads from unproven overcharges.

Holding: The Court reversed the state high court, holding that when a State pools utility fees it must prove those fees do not exceed the reasonable cost of regulating railroads, and that Washington failed to meet that burden.

Real World Impact:

Requires states to prove pooled utility fees match actual regulatory costs.
Allows railroads to challenge and potentially recover fees lacking separate accounting.

Topics: utility fees, state regulation, railroad costs, interstate commerce

Summary

Background

A railroad company paid annual fees to Washington’s Department of Public Works for 1929–1933 and sued to recover those payments made under protest. A 1929 law required many public utilities to pay 0.1% of gross operating revenue into a single “public service revolving fund.” The Department used that fund for many activities, including litigation and work not clearly tied to inspecting or regulating railroads. No separate accounts were kept to show how much was spent specifically on railroad regulation.

Reasoning

The core question was whether the statute was invalid on its face or, if not, whether the State had proved the collected fees were just the reasonable cost of regulating railroads. The Court held the statute did not obviously fail on its face. But, relying on prior decisions, it explained that when a state commingles fees and cannot show how much was spent for legitimate regulation, the State bears the burden of proving fees were not excessive. The Court found Washington failed to carry that burden because the department’s accounting and the auditor’s lumped figures did not separate legitimate regulation costs from other expenditures.

Real world impact

The decision protects companies paying regulatory fees by requiring states to justify pooled fee spending or keep records showing how funds match regulatory work. The Court reversed the state high court and sent the case back for further proceedings consistent with this ruling, opening the door to recovery if excessive charges cannot be shown to be legitimate.

Dissents or concurrances

A dissent argued the railroad bore the burden to prove actual overpayment and that the state’s accounting and auditor testimony adequately supported the state court’s finding against the railroad.