The Minnesota Rate Cases

Background

Stockholders of three railroads sued to stop orders and two Minnesota laws that set maximum freight and passenger charges for trips wholly inside the State. The State’s Railroad and Warehouse Commission had held public hearings and adopted lower maximum class rates, commodity schedules, and a two-cent-per-mile passenger fare. Lower federal courts found those intrastate rates burdened interstate commerce and, in two suits, declared them invalid and enjoined enforcement.

Reasoning

The key question was whether a State may fix reasonable maximum charges for transportation that are wholly within its borders when the same railroad also carries traffic between States. The Court said States keep the power to set reasonable intrastate rates unless Congress or the federal commission has lawfully occupied that field or the state rule directly and plainly burdens interstate commerce. Applying the record, the Court concluded that most Minnesota measures were within state power and not shown to be confiscatory; but on the facts for one smaller railroad the rates did deny a fair return and were therefore unlawful as confiscatory.

Real world impact

The decision confirms that state regulators can set statewide maximum fares and freight charges for purely local service, subject to later federal action. Railroads will need clear, fact-based proof of confiscation to overturn state rate laws. The Court also left open federal oversight where Congress or the Interstate Commerce Commission acts to regulate interstate rate relationships.