Dakota Central Telephone Co. v. South Dakota Ex Rel. Payne

Background

In 1919 South Dakota’s Attorney General and Railroad Commissioners sued several telephone companies to stop them from putting into effect a schedule of local rates prepared by the Postmaster General. The State said the companies must follow lower state rates for local business and that applying the federal schedule would violate state law. The telephone companies answered that their lines, equipment, and operations had been taken into federal possession during the war, were being run by the Postmaster General under a presidential proclamation, and covered by contracts fixing compensation.

Reasoning

The Court considered whether Congress and the President lawfully could take full control of telephone systems during wartime and whether that control left room for states to set intrastate rates. It held that the 1918 congressional resolution and the President’s proclamation authorized complete federal possession and operation, including control of revenues and rates. The Court rejected the lower court’s view that a proviso in the resolution preserved broad state “police” power to fix intrastate rates, saying that such a reading would contradict the clear scope of the federal grant and create anomalies. The opinion followed the same reasoning used in a related railroad rates decision.

Real world impact

As a result, when the United States lawfully takes over and operates telephone systems, federal control and the Postmaster General’s rate schedules govern intrastate charges and state rate laws cannot be enforced during that federal control. The Court reversed the lower court’s judgment and sent the case back for further proceedings consistent with this decision.

Dissents or concurrances

Justice Brandeis dissented.