United States v. Erie Railroad

Background

The United States brought two suits asking courts to stop a railroad company from issuing free passes to officers, agents, and employees of other carriers not subject to the Act to Regulate Commerce. The challenged passes included those given to employees of trans‑Atlantic steamship lines and to an employee of the Great Eastern Railway of England. The railroad admitted the practice, explained that passes encouraged freight and passenger business, and relied on a proviso in the 1906 amendment and an earlier statute provision allowing exchanges of passes among carriers’ officers and employees. Justice McReynolds did not participate.

Reasoning

The core question was whether the statute forbids or permits giving free transportation to officers and employees of carriers not covered by the law. The Court examined the statute’s plain language, noted the long, open industry practice, and considered rulings by the Interstate Commerce Commission that took a narrower view but were not enforced. The Court found the literal terms and later provisos supported allowing pass exchanges and saw business policy and carrier self‑interest as safeguards against abuse. Because the Commission’s earlier rulings had not been followed in practice, the Court declined to let them override the statute’s wording and the long-established custom, and it affirmed the lower courts’ dismissals of the Government’s bills.

Real world impact

The ruling lets the railroad continue exchanging free passes with officers and employees of other carriers as described in these cases and limits the Government’s ability to obtain an injunction on the same statutory grounds. It relies on the text of the law and recognized business practices rather than on inactive agency interpretations.