Detroit United Railway v. City of Detroit

Background

The dispute is between the Detroit United Railway Company and the City of Detroit over a city ordinance passed August 9, 1918, that capped fares and transfers for streetcar trips. The company operated a large system with some tracks under expired franchises and others under unexpired franchise contracts. The company says the ordinance will force it to operate at a deficit and will impair existing franchise contracts after the city refused its request for higher fares.

Reasoning

The Court asked whether the company’s written allegations, taken as true for now, stated a valid constitutional complaint. The majority said yes. The ordinance applied maximum fares and transfer rules to continuous trips across franchise and non-franchise lines. The Court relied on an earlier decision that when a city continues a public service instead of removing it, the operator must be allowed a reasonable return. If the ordinance requires continued operation at non-compensatory fares, it could deprive the company of property without due process and could impair franchise contracts. Because the bill alleged those harms, the District Court should have heard the company’s request for temporary relief and proceeded to a full hearing.

Real world impact

The ruling sends the case back for a full hearing and keeps open the company’s challenge to the fare limits. In practice, it means cities that try to force continued transit service at low fares may have to show the operator can obtain a fair return. The decision protects the railway’s right to seek a court determination before the ordinance is enforced if the company plausibly alleges constitutional injury.

Dissents or concurrances

Three Justices disagreed, arguing the bill did not prove likely injury to franchise lines and that the ordinance was a revocable offer the company could accept or refuse, so it should be upheld.