Tuesday, May 26, 2009

Why the Law Matters: Santa Clara County v. Southern Pacific Railroad

In light of Obama’s recent Supreme Court nomination and the likely fight over the liberal vs. conservative direction of the Supreme Court, I’d like to reflect on how recent and unusual it is that the major political conflicts around the Court have revolved around questions of abortion and the rights of the accused, as well as other so-called “personal freedoms.” Don’t get me wrong, however – I’m not arguing that there has been a recent politicization of an otherwise neutral Court. I find that to be a ridiculous assertion. In a democracy, law and its interpretation is inherently political, an expression of our most deeply-held beliefs about the extent and expression of our rights, the meaning and reality of justice, the nature and scope of the state and the market, our very definition of what freedom, equality, democracy, privacy, independence, speech, mean.

Historically, however, the conflicts over the Court have gone through phases: before the post-1973 struggle over abortion, Court politics largely revolved around questions of civil rights (especially questions around affirmative action and de-segregation) which exploded onto the national consciousness in 1954, but had obviously been brewing for at least ten years before that. However, the longest-lasting political fight over the Court has been the fight over the nature of the state and the economy, and the competing claims of democracy and property rights, that arguably lasted from the end of the Civil War (many of the Civil Rights Cases that emasculated Reconstruction and its 13th, 14th, and 15th Amendments revolved around questions of economic regulation) through to the 1940s.

I’d like to consider this particular political struggle, because I think it illuminates the critical importance of the law and the Supreme Court in shaping the most fundamental political decisions in our country’s history (which raises the question of how democratic our decision-making process really is), and because it shows that the true fight being carried on is not actually a fight over the law (because neither side has even been consistent regarding separation of powers, judicial independence or activism, strict constructionism versus more expansive legal philosophies, etc.), but rather a broader fight over the direction of national policy. In that sense, both sides believe that the court “is where policy is made” in our peculiar system of checks and balances, but not everyone’s honest about it.

Before I start, let me just say that there’s so much to learn about the relationship between the law and policy that this post is really inadequate. I would recommend the following books. William Novak’s The People’s Welfare, Michael Curtis’ No State Shall Abridge, Ned Beatty’s Age of Betrayal, William Forbath’s Law and the Shaping of the Labor Movement, Morton Horwitz’s Transformation of American Law, and Martin Sklar’s Corporate Reconstruction of American Capitalism, just for starters. They’re books every citizen should read, and they make great summer reading (for amnesiacs and political/legal junkies).

The reason I’ve singled out Santa Clara is that it’s a great example of how a small, almost unnoticed change in the law can have huge political ramifications, and also a good example of how law, even Supreme Court super-schmancy Constitutional law, is really politics with fancier words.

First, the background - in the 19th century, the railroad was the economic thoroughfare of life, especially in rural farming districts and anywhere out West; agricultural products traveled from country to town, and from the rural West to the urban East via rail, industrial goods went from the cities to the countryside, and from the developed East to the developing West via the same routes. As a result, railroads were perfectly placed to extract massive monopoly rents from their unique position, and did – there’s a reason why the first big corporations were railroad corporations, why they invested massively in political lobbying, and why they received such political largess in the form of Federal aid and land-grants to finance railroad construction. At the same time, the railroads began diversifying their interests – they used their position as carriers and huge landowners to exert a huge influence over the agricultural market, often buying up large percentages of the yearly crop through their carrier fees, they were bought out or merged with coal and steel companies to vertically integrate the product from the mine to the mill to the shop, and so forth. This naturally touched off a huge reaction across the country – in the East, the American labor movement rose against industrial corporations starting in the 1870s and in the railroad industry first; on the Great Plains and out West, the Populist movement began to rise; but throughout the country, even your garden variety republicans turned against the railroads and embraced education.

Out in California, the major struggle was between the state and the railroads. The major California railroads, especially the Southern Pacific, not only dominated the agricultural market through their monopoly on commerce, but also through their massive land holdings, and their whole-sale purchase of the state legislature. As a result, the major impulse behind California Populism was the fight against the railroads, the drive to regulate railroad rates, to tax railroad property, and to reform the political system.

And Santa Clara was fundamentally a fight over whether the state could tax railroad property, in this case, the fencing along the right of way. Ultimately, a minor, almost piddling issue. The true consequences of the case was the obiter dicta that “The Court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution which forbids a state to deny to any person within its jurisdiction the equal protection of the laws applies to these corporations. We are all of opinion that it does.” With those two sentences, not even decided by the Court but rather added in a headnote by John Chandler Bancroft Davis, the Court’s Reporter (and coincidentally the former president of the Newburgh & New York Railroad Co.), a massive change in American law was made. Where previously corporations had been viewed with suspicion as artificial creations of the state that should be carefully regulated to protect the “salus populi” (the people’s welfare), now they were legal persons with all of the rights that had been judicially stripped away from the freedmen. As a result, any regulation, any tax, any government action that could be construed as damaging to the rights of a corporation could be challenged under law as a violation of equal protection, or substantive due process, or any other right under the 14th amendment.

This one decision massively upended the political balance between corporations and their adversaries, bringing the courts (and thus the law-enforcement powers of the state) into the fray against them. Railroad rate regulations to stop railroads from robbing farmers blnd or rigging markets in favor of particular trusts? Violations of due process. Health and safety regulations? Violations of equal protection if they weren’t the same for all industries. Unions and strikes? Out of the question. And so it went.

Part of the tragedy of the decline of a genuine liberalism in the legal profession, a shrinking away from the boldness of the Warren Court years, has been a hesitancy to challenge the assumptions about the free market and the nature of property that are at the very basis of the corporation’s advantage in the courts. This is especially problematic because the conservative legal movement has not been so hesitant. One of their major goals, along with eviscerating a woman’s right to choose or the right to privacy, is a full-blown assault on the modern reading of the Commerce Clause. As Clarence Thomas has written, “our case law has drifted far from the original understanding of the Commerce Clause. In a future case, we ought to temper our Commerce Clause jurisprudence in a manner that both makes sense of our more recent case law and is more faithful to the original understanding of that Clause.” This is the ball game right here. If the Commerce Clause goes, so does all economic regulation, so does any environmental or labor regulations, and so does anti-discrimination legislation in the field of employment or housing.

So when we gear up for Sotomayor, or for whoever Obama picks next, there is a much bigger fight we need to be ready for, and there is no reason why we should think defensively about what’s possible in the realm of the law.


  1. This is the preferred "progressive" interpretation, but I'm not sure it's correct. Corporations were considered to be "legal persons" for as long as they had been in existance, going back to the trading corporations that settled the continent. What changed in the 19th century was, first, the reform of corporate incorporation laws that allowed any business to easily incorporate by filing papers instead of requiring a separate act of the legislature for each one, and the notion coming out of 14th amendment jurispriudance of "Sustantive Due Process", which conflated judicial action with legeslative, and declared regulation of property to be the equivilent of a judicially imposed fine.

    Neither of these involved a change in the concept of what a corporation was, which is why the quote from Santa Clara caused so little stir. Corporations as legal persons had been around for a long time, but it was only in the 19th century that they became central to economic life.

  2. Hello Jimbo! Thanks for commenting.

    The issue is whether as "artificial persons" they had the same rights and privileges as "natural persons" - such as the right to due process emerging under the 14th amendment.

    As the attorney for Santa Clara in the case noted, the amendment itself, the debates around the amendment, the Civil Rights Act before it, all palpably show that the persons referred to in the 14th amendment are "natural persons" - i.e, human beings capable of being "born" or "naturalized."

    Prior to this, the idea that corporations should be closely regulated for the public good was dominant - and hence, the efforts by state governments to regulate and tax corporations. After, and this is the critical part, the doctrine of substantive due process was used to block regulation and taxation. Without the claim that the 14th amendment applies, you don't get the critical link in the chain.