Railroad Commission v. Texas & Pacific Railway Co.

Background

Railroad companies that carried logs and staves to New Orleans sued to stop the Louisiana Railroad Commission from enforcing state orders and penalties that set lower intrastate freight rates. The shipments originated at stations inside Louisiana, were moved by rail to New Orleans, and then loaded onto ships for export to foreign ports. State-approved local rates were lower than the interstate or federal rates filed with the Interstate Commerce Commission, and the railroads asked a federal court to declare the state orders void and to enjoin collection of fines.

Reasoning

The key question was whether these movements were purely local or part of foreign commerce under federal authority. The Court looked to the practical character of the shipments: they were intended for export, were held and handled as export cargo, and only underwent the necessary transshipment at New Orleans. The Court explained that the essential nature of the transportation—its being in the course of export—controls, not technicalities like local bills of lading. Because the shipments were part of foreign commerce, the State could not enforce its rate orders and penalties on them, and the Court affirmed the injunction entered by the lower courts.

Real world impact

The decision prevents Louisiana from applying its intrastate freight rules and fines to rail shipments that are destined for export. Railroads, shippers, and exporters who treat cargo as export-bound at the seaboard will be protected from state rate enforcement in these circumstances. The decree in this case was affirmed, leaving federal authority over export shipping intact.