Vandalia Railroad v. Schnull
Headline: Court reverses lower courts’ enforcement of Railroad Commission rates, limits states from forcing railroads to carry specific traffic at unremunerative rates, and sends the case back for further proceedings.
Holding: The Court held that a state cannot lawfully force a railroad to carry a segregated class of traffic at rates that do not reasonably compensate the railroad, and reversed the state court's enforcement order.
- Limits state power to force railroads to carry segregated traffic at unremunerative rates.
- Allows railroads to challenge commission orders that deny fair return on the property used.
- Sends the dispute back to lower courts for further proceedings.
Summary
Background
A group of wholesale and retail grocers in Indianapolis sued a railroad company to force it to charge and accept only the rates set by the State Railroad Commission in an order dated December 14, 1906, effective February 1, 1907. The railroad answered that those rates would not yield enough revenue to cover costs and provide a fair return on its property, and claimed its own posted schedules were lawful. A state trial court enjoined the railroad from charging higher rates, and the state supreme court affirmed that injunction.
Reasoning
The Supreme Court took up whether a State may single out a particular class of traffic and compel a carrier to transport it at rates that do not fairly compensate the carrier. The Court concluded the railroad’s answer raised that issue and that the state may not arbitrarily force carriage of a segregated class at less than reasonable compensation. The opinion explained that overall revenues for the carrier can be considered, but a state may not lawfully require transport of a specific commodity or class at a loss that denies a reasonable reward. The Court rejected arguments that an earlier federal case resolved the question and found the record required further proceedings.
Real world impact
The decision limits a State’s power to impose rates that single out certain traffic for unremunerative treatment and affirms that railroads can press claims that such orders deprive them of a fair return. The Court reversed the state-court decree and remanded the case for further proceedings consistent with this opinion, so the ruling does not end the dispute.
Dissents or concurrances
Four Justices (Day, Pitney, Brandeis, and Clarke) dissented from the Court’s judgment.
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