HISTORY OF THE SUPREME COURT
OF THE UNITED STATES
THE SUPREME COURT UNDER CHIEF JUSTICE WHITE
The next appointment made by President Taft to the Supreme Court was that of Charles E. Hughes in 1910, as an Associate Justice to succeed Justice Brewer who died on March 28, 1910.
Of Justice Brewer we shall finally remark, in passing, that so thoroughly had he indoctrinated law in accordance with the demands of capitalist interests, that when he died only one progressive decision could be attributed to him by his eulogists. This was the decision upholding the constitutionality of the Oregon ten-hour law for women. This law the Supreme Court of the United States affirmed on the principle that a State could constitutionally protect women workers so as to thus conserve the future of the race and the general welfare of society.
Born in 1862, Hughes was the son of a hard-shell Baptist minister and was of the same denomination himself. After his admission to the bar, he became a clerk in the law office of Chamberlain, Carter and Hornblower, of New York City. This was a notable corporation firm ; of Walter S. Carter, one of its members, a laudatory biographical account says, Over one hundred distinguished lawyers have served in his office, such as William B. Hornblower, Lloyd W. Bowers and Paul D. Cravath. Sherburne Blake Eaton, a member of the firm, became chief executive officer of the Edison Electric Light Company in 1881, and its president and general counsel in 1884. Carters great obsessing hobby was in encouraging a peculiar and ludicrous form of caste snobbery ; he was a member of the Settlers and Defenders of America, the Founders and Patriots of America, the Society of Mayflower Descendants, and the Sons of the Revolution. As for Hornblower he was, as early as 1880, counsel for the New York Life Insurance Company ; he became one of the trustees of that company, and head of the committee which approved the so-called yellow-dog fund of the New York Life Insurance Company, which fund, ostensibly disbursed as legal expenses, was used, in reality, to purchase favorable legislation and to defeat hostile bills. Hornblower was also counsel for the New York Central Railroad Company, the Rome, Watertown and Ogdensburg Railroad Company, the New York Security and Trust Company, and many other corporations.
This was the same Hornblower who passed as a notable reformer in politics, and who (as we have already related) had been nominated by President Cleveland an Associate Justice of the Supreme Court of the United States, which nomination had been rejected by the Senate, in 1894, for personal-political reasons.
Such was the atmosphere of the office in which Hughes was a law clerk, and it may be added that Cravath was a fellow clerk at the same time.
Hughes career now expanded. He was a precise, methodically-minded man, extremely careful of the proprieties, never disposed to break conventions, studying the law and the law system as he found them, sticking to the letter and dismissing the spirit, for he saw that it was the letter that was applied. He perceived, too, that the most successful lawyers were those pleading for corporations ; they waxed fat and great, and were high personages in the community. On the other hand, he could not help seeing that those who made a practice of defending the poor and helpless, the victims of the industrial system, not only invited poverty, but suffered a distinct stigma in the eyes of the influential and powerful.
Hughes as an Attorney.
Hughes had married Carters daughter, and in 1888 the law firm of Carter, Hughes and Cravath was formed. Need it be explained who Paul D. Cravath was, the skillful and renowned Cravath ? Later he became, and for nearly a quarter of a century remained, Thomas F. Ryans most confidential legal aide, not as adroit as Elihu Root, but more constant, standing to Ryan as his shadow. Of Ryans career we have already given sufficient glimpses ; how from being a penniless young man, he became one of the most conspicuous multimillionaires of the country, owning or controlling street car systems, gas plants, railroads, trusts and other properties, and we shall see how he acquired one of the great life insurance companies. We cannot enter here into the immense mass of testimony before various legislative committees revealing the long trail of corruption and criminal transactions of corporations controlled by him.1 Whenever a franchise for Ryans benefit was to be slid through Legislature or Board of Aldermen, there Cravath was to be found with his particular arguments to persuade legislators that the grant should be made.
When Hughes was a candidate for Governor of New York, in 1906, he was quoted as denying that he had ever been a corporation lawyer except in the service of the State. Did the facts coincide with this statement ? Let us see.
Effort to Put Deadly Wires Under Ground.
By the year 1875 New York City and other cities were filled with a network of deadly telegraph, electric-light and other wires, strung over the pavements on wooden poles. The introduction of heavy electric-light cables on poles brought a new element of danger to human life. A constant menace, these wires, as the courts later on stated, were improperly insulated. Their falling to the ground killed people constantly. In fighting fires, New York Citys firemen were also often killed, and were prevented by the wires from overcoming fires as successfully as if the wires had been underground.
In the year 1875 the New York Legislature had already passed an act ordering that the wires should be placed underground. The electric-light and other companies affected made resistance to this act, and had it declared unconstitutional. Year after year they lobbied in the State Legislature to prevent the passage of other acts.
But deadly accidents kept increasing, and the public demand became stronger that the barbarous system of stringing wires overhead be abolished. The companies refused to make the change on the ground that it would entail much expense.
At this point high city officials suddenly began to support the public demand that the poles must go. What was the motive of these Tammany officials ? Was it one of public spirit ? Scarcely. The sequel, years after, revealed that a band of shrewd politico-capitalists had seen how they could take advantage of this reform movement, and under cover of it get a comprehensive monopoly for themselves of the right of laying and operating underground conduits for the wires.
The New York Legislature, in 1884, enacted a law compelling companies in all cities of more than 500,000 population to put their wires underground before November 1, 1885. If they failed to do this the city government was empowered to tear the wires down and put them underground.
The companies raised the objection that the time allowed them was too brief. Moreover, they did not want to put the wires underground in any more cities than could be avoided. Lobbying at Albany produced an amendatory act making the law apply to cities exceeding a million population only. This, of course, meant that the operation of the act was restricted to New York City ; no other city had a population of more than a million. The act of 1885 also created a Board of Electrical Control. A supplementary act was passed in 1886. Still another law was enacted in 1887 giving New York City authority to remove the poles and wires ninety days after notice should be served.
These laws were contested by the companies. Finally, on May 12, 1889, Mayor Grant ordered the electric-light wires to be torn down. His ground was that they were imperfectly insulated and dangerous to human life.
Hughes Pleads for Electric Light Companies.
On November 11, 1889, James C. Carter, Joseph H. Choate and Charles E. Hughes, representing the United States Illuminating Company and the Mount Morris Electric Light Company, went to court. Pleading that the act of 1887 was an invasion of the rights of property, they secured an injunction against the city.
The city appealed for the dissolving of the injunction. This appeal was argued in the General Term of the Supreme Court, in New York City, in December, 1889, before Judges Van Brunt, Barrett and Brady. The companies were again represented by Carter, Choate and Hughes.2
The three judges concurred in deciding in favor of New York City. Their decision was of rather a caustic order, scoring the contentions of counsel for the companies. . . . When, said this decision, it is apparent, as in the case at bar, the condition of the wires is such that they are dangerous to human life, and that any passer-by, without negligence on his part, is liable to be struck dead in the street, can it be said for a moment that the public authorities have no power to abate this nuisance and protect the lives of its citizens ? Indeed it is one of their highest duties, and if they allowed such a condition of affairs to continue, might make the city liable for the damages sustained by reason of their negligence in not removing the common nuisance. . . .
Counsel for the companies, the court said, had contended that the Board of Electrical Control had refused to allow repairs to be made. The decision disposed of this plea. The court said that it was established beyond question that the wires had become excessively dangerous. Attention was called to this condition of affairs by the happening of accidents by which human life was sacrificed. . . . This, the court stated, was a shameful condition of affairs.
The companies, the court went on, had not made the slightest effort to compel the Board of Electrical Control ; if they unjustly refused, to grant them permits to repair. . . .
If these electrical companies had been actuated by the slightest desire to put their apparatus in a condition such as would not endanger human life, they could easily have found a way to remove the obstruction which they claim was placed in their path by the Board of Electrical Control. It would seem that they were only too willing to shelter themselves behind the assumed unreasonableness of some of the regulations of the board, and to allow their apparatus to get into such a condition that it was dangerous to human life and become a public nuisance. The companies, the court said, were guilty of the wilful violation of a manifest duty in allowing the wires to become dangerous. They are without excuse, and when they claim that the destruction of these instruments of death is an invasion of the rights of property, such claim seems to proceed upon the assumption that nothing has a right to exist except themselves.3 The court upheld the constitutionality of the law.
Scramble for Underground Franchises.
While Hughes was thus acting for the electric-light companies, his partner, Cravath, was busy in other directions. Realizing the great value of a monopoly of underground conduits, the Western Union Telegraph Company (then controlled by Jay Gould and Russell Sage) and the Metropolitan Telephone Company4 (now the New York Telephone Company) had organized the Consolidated Telegraph and Electrical Subway Company, which secured a franchise to construct and operate conduits throughout the entire city. All other companies using wires were now confronted with the necessity of using those conduits and of being forced to pay a certain schedule of rentals.
The electric-light companies saw the situation in which they now were. On the one hand the city was moving against them to force their wires underground ; on the other, the only conduit franchise was owned by the Consolidated Telegraph and Electrical Company. While Hughes was one of the attorneys resisting the citys move, partner Cravath was persuading the Board of Electrical Control to give the electric-light companies franchises for underground conduits.
There was a lively scramble for franchises. On October 14, 1889, Wheeler H. Peckham appeared as counsel for the Standard Electrical Subway Company. This was, it is hardly necessary to say, the same Peckham whom Cleveland, in 1894, nominated as Associate Justice of the Supreme Court of the United States, and whose nomination was rejected by the Senate because of Senator Hills personal opposition. Peckham pleaded with the Board of Electrical Control that it give a conduit franchise to the Standard Electrical Subway Company.5 Elihu Root came forward, on February 17, 1890, to plead for the gift of a conduit franchise to the Manhattan Electric Light Company and the Harlem Lighting Company. Root opposed Peckhams company, and argued against giving it a franchise.6
On the same day on which Root appeared, Joseph H. Choate, Paul D. Cravath 7 and Caleb H. Jackson, representing the United States Illuminating Company and the Safety Electric Light and Power Company, argued before the Board of Electrical Control in favor of conduit franchises for those companies, and opposed the Consolidated Telegraph and Electrical Subway Company.8
The upshot of this scramble was that all these companies, succeeded in getting franchises in this way : A new company, called the Empire City Subway Company, was organized, and presented in 1891 with a comprehensive franchise to lay and operate underground conduits. The conduits of the one company were, it was stipulated, to be used for high-tension, and those of the other for low-tension, wires.
It may be said parenthetically at this point that Hughes and Cravath sundered partnership in about the year 1890.
Having fought the city and then one another, the companies now combined in a huge monopoly. From that day to this not a single telegraph, telephone, electric-light or other company disapproved of by the combination, has been able to get wires in the conduits. It was originally provided that all companies should have access, but this condition has been evaded by various pretexts.
With this monopoly of underground conduits secured, the various companies raised their rates to an extortionate scale. The Metropolitan Telephone Company increased its rates for unlimited service from $125 and $150 a year to $240 annually, and in some years its profits rose to 145 per cent. on the actual cash capital, excluding from computation the capital added by dividends not distributed.9 The conduit monopoly has made enormous profits. Under the terms of the franchise all profits exceeding ten per cent. were to go to the city, but by a continuous process of juggling with the books, and the frequent issue of watered stock, the nominal profits (as reported to the city) have never equaled ten per cent.
All the electric-light companies were later merged into one monopoly, which in turn was controlled by the Consolidated Gas Company, which was controlled by the Standard Oil Company.10 In view of the decision of the Supreme Court of the United States in the eighty-cent case (related in a previous chapter) which Justice Peckham, a brother of Wheeler H. Peckham, wrote, and considering the facts here narrated, it is well to repeat the names of some of the great capitalist magnates controlling the Consolidated Gas Company. Among the directors were William Rockefeller, George F. Baker, James Stillman, William C. Whitney, Thomas F. Ryan, Anthony N. Brady and sundry others.
Thus we see Hughes starting out as a young lawyer in the lucrative field of representing corporations. His clients, whether corporate or private, were all rich ; poor mens cases do not seem to have been any part of Hughes practice. That Hughes himself was in money matters personally and scrupulously honest was a fact. No doubt he gave conscientious, zealous service for the fees that he received.
But the question of personal honesty embraces so many aspects, and demands so deep an analysis that it cannot conclusively be said that a man was honest because he resorted to no illegal methods. There is an intellectual and class dishonesty which in its results far exceeds pecuniary dishonesty. The question might here be profitably entered into since it is the fact that an individuals views and conduct are largely determined by his interests, training, environment and long-continued associations. The problem is to a great extent a social, not an individual, one ; and when we consider why this or that man was selected for the Supreme Court bench it is necessary to know what his antecedent associations, influences, and interests were.
New York, Westchester and Boston Project.
The second illustration of Hughes activities as a lawyer was his efficient work in getting a franchise for the New York, Westchester and Boston Railway.
For its entrance into New York City, the New York, New Haven and Hartford Railroad had long had to use the New York Centrals tracks from Woodlawn to the Grand Central depot.11 This privilege cost it a certain tariff of seven cents on every passenger, which tariff was recently increased to twelve cents. The New York, New Haven and Hartford Railroad was and is controlled by J. Pierpont Morgan ; it now sought its own entrance into New York City. How was this to be obtained ?
It happened that in the year 1872 a company called the New York, Westchester and Boston Railroad Company had organized by filing articles of incorporation at Albany. In reality it was an abortive corporation ; it had never completed the necessary legal formality of filing an affidavit as prescribed by Section 2, Railroad Law of 1850.12
The company, or what called itself the company, became insolvent in 1876, and a receiver was appointed on March 25 of that year. On March 22, 1881, the Supreme Court of New York directed the receiver to sell all its rights, title, interest, real estate, etc. These were sold to William F. Pelt for $5,500. According to good legal authority this sale operated to deprive the company of any located route, except such as the Legislature might subsequently grant. But the Legislature did not act.
For years the paper franchise was hawked about for sale ; nobody seemed to want it.
Hughes Comes Forward for the Project.
In, however, either the year 1900 or 1901 some powerful interest suddenly took up the phantom, and on the strength of it tried to get a definite franchise from the Board of Aldermen. This body was at that time vested with the power of franchise granting. It was significant that the firm of Carter, Hughes, Rounds and Schurman (so the firm was now styled) appeared as the attorneys advocating the granting of the franchise. They seldom came forward except to represent some big interest.13 Hughes was the member of the firm who was the active attorney in arguing for the passage of the franchise.14
Hughes solemnly denied that any large interest was behind the project ; he asserted that the company was one absolutely independent of connection with any other corporation. The Board of Aldermen were skeptical.
At the same time another company called the New York and Port Chester Railroad Company projected itself upon the scene, applied for a franchise, and began opposing the New York, Westchester and Boston Company.
Report had it that both companies were owned by the New York, New Haven and Hartford Railroad, and interesting rumors declared that the show of opposition was only a trick to blind the people ; that the object was to get a franchise for either company or both companies.
Later developments proved, as we shall see, that both companies were, in fact, owned by the New York, New Haven and Hartford Railroad, controlled by J. Pierpont Morgan and the Standard Oil group.
The Aldermanic Hold-Up.
For three years the Board of Aldermen refused to grant the franchises. Nobody imputed any lofty motive to the Honorable Board. Meanwhile, what Lemuel Ely Quigg on another occasion called accellerators of public opinion carried on their deft work. Taxpayers organizations were formed to support or oppose one side or the other, and the Aldermen were bombarded with a series of approving or denunciatory resolutions.15
A significant episode now turned up, revealing that legislative bodies were merely registering committees for the great capitalists.
The Board of Aldermen had withheld granting both the Westchester franchise and the franchise for the Pennsylvania Railroad to enter New York City via the Hudson River tunnel. Somehow and from somewhere the announcement now came that unless the Board of Aldermen acted, a law would be passed by the Legislature stripping it of all power of granting franchises. The threat was soon carried into execution. The Legislature passed an act vesting franchise-granting power in the Board of Estimate and Apportionment. This body was favorably inclined.
Board of Estimate Gives Long-Sought Franchise.
The first point that this Board decided to pass upon was the question whether or not the New York, Westchester and Boston Railroad Company was or was not a defunct corporation.
On March 30, 1904, Corporation Counsel Delaney (elected by Tammany Hall) reported to the Board of Estimate and Apportionment that the Board had no jurisdiction to examine the legal capacity or incapacity of the company.
In the minutes of the Board of Estimate and Apportionment Charles E. Hughes was described as the attorney of the projected railroad. These minutes give a long letter written and signed by Hughes from the office of Carter, Hughes, Rounds and Schurman, 96 Broadway and 6 Wall Street, to Corporation Counsel Delaney, proposing certain changes in the wording of the franchise contract.16 Delaney wrote in part this reply to the Board regarding Hughes proposals : Some of these I will not here discuss because I do not deem it expedient for the Citys interests that they should be adopted, but there are several which should receive consideration.17
The New York, Westchester and Boston Railway Company finally received its long-sought franchise on June 24, 1904. Although represented by Hughes as an absolutely independent company, which it may have been in name, it really was nothing more or less than an adjunct of the New York, New Haven and Hartford Railroad Company. Its franchise allowed it to operate more than sixteen miles of four-track line within New York Citys limits, the main line crossing one hundred and twenty streets ; and its branch line seventy-four streets. It secured practically all the available routes for entrance and exit to and from New York City by way of the Bronx. It is the only purely privately-owned rapid transit line in New York City. Its terminal, it is true, is on the north side of the Harlem River, but it will probably be able to convey its passengers downtown by a new subway. Moreover, by means of the Pennsylvania Railroad Companys New York Connecting Railroad, which will traverse Randalls and Wards Island to and from Long Island, its trains will be able to run into the Pennsylvania Railroads station on Seventh Avenue and thence under the Hudson River south and west, and the Pennsylvania Railroad can run its trains over the New York, New Haven and Hartford Railroads tracks into New England.
The immense value of the franchise can, therefore, be seen at a glance. Its present value both as a railroad entrance and outlet and as a rapid-transit line is recognized as great enough, and its potential value considering growth of population is unquestionably even greater.
J.P. Morgan and Associates in Control.
That the New York, Westchester and Boston Railroad and the New York and Port Chester Railroad were both owned by Morgans New York, New Haven and Hartford Railroad was shown by the formal incorporation of the Millbrook Company on November 5, 1906. The Millbrook Company was a holding company for the New York, New Haven and Hartford Railroad. It held the entire stock of the Port Chester Railroad, which in turn held the stock of the New York, Westchester and Boston Railroad.
The final proceedings occurred when Hughes was Governor. An act was passed by the New York Legislature and signed by Governor Hughes on May 29, 1909,18 authorizing the New York, Westchester and Boston Railroad and the New York and Port Chester Railroad to consolidate. The consolidation agreement provided for $45,000,000 capital in all, with possibilities of increase. There were $5,000,000 of stock, and $40,000,000 of mortgages, on which $15,100,000 of bonds had been issued by December 23, 1909. The remainder of the bonds to be issued under the mortgages were subject to the consent of the Public Service Commission, Second District. But this capitalization gives no adequate idea of the intrinsic value of the franchises, the value of which is estimated at much more than a hundred million dollars.
The consolidation agreement also showed that the directors of the new company were J. Pierpont Morgan, Lewis Cass Ledyard, William Rockefeller, Robert W. Taft, Charles S. Mellen (president of the New York, New Haven and Hartford Railroad) and other capitalists. Further, the agreement stated that the New York, New Haven and Hartford Railroad Company owned 91,581 of the total issue of 91,590 shares of the New York and Port Chester Railroad,19 and 105,384 shares of the entire issue of 105,397 shares of the New York, Westchester and Boston Railroad.20
Hughes Becomes Prominent.
Up to this time Hughes was comparatively unknown to the general public. He first attained popular notice in his capacity as counsel for the (Stevens) Legislative Committee of New York which was appointed to investigate the price of gas. The result of this committees findings was the passage of a law providing that the charge for gas in New York City should be not more than eighty cents per thousand cubic feet. How this law was long contested, and how the Supreme Court of the United States, while upholding its constitutionality, adroitly used the case to intrench property interests to a remarkable degree these facts have been related in clear detail in a previous chapter.
When, in 1905, a contest between competitive magnates in the Equitable Life Assurance Society led to the disclosure of a great scandal, a legislative committee was appointed to investigate the methods of the large life insurance companies. Hughes was chosen as the committees counsel. There was a belief that this investigation was inspired or instigated by certain powerful magnates or groups of magnates with the ulterior purpose of ousting certain other magnates from control of the vast assets of the insurance companies. If this were true and indications strongly pointed that way there is no evidence for the suspicion that Hughes was in any way a conscious party to the proceeding, even though newspapers opposed to him politically later pointed out insinuatingly that at one stage of the contest for the control of the Equitable Life Assurance Society he had been counsel to James W. Alexander, president of that corporation, and that he had been counsel for the Mercantile Trust Company allied with the Equitable Life Assurance Society in part of the litigation involved by the Shipbuilding Trust scandal.
He Exposes Insurance Iniquities.
As counsel to the committee, Hughes displayed uncommon skill and perseverance in unearthing certain parts of the vast system of insurance corruption through which the directors, brokers, promoters, syndicates of magnates and retainers, members of Legislatures, lobbyists and politicians enriched themselves at the expense of the policy holders. Point by point he patiently brought out the involved and concealed circumstances of the long-continued enormities of loot and corruption. Reputations, long acclaimed for their respectability, were blasted, others ruined, by these revelations. Of the great array of facts presented in the committees report, we have already described some in a previous chapter.
Hughes work called forth a newspaper demand that he be nominated for Governor of New York by the Republican party, that he might be able to put into law the insurance reforms that he had advocated. Meanwhile an event took place which the sophisticated might well have expected but which surprised the innocent.
The Odd, Yet Inevitable, Result.
It was soon observed that the only real result of the great investigation was to enable some magnates to oust others, and to concentrate the power of the dominating financial groups. Morgan tightened his hold on the New York Life Insurance Company. The Harriman-Standard Oil Company interests obtained a completer control of the Mutual Life Insurance Company, and Hyde, Harrimans puppet in the Equitable Life Assurance Society, was put out, and none other than Thomas F. Ryan stepped into full control of the $470,000,000 assets of that company and retained it until December, 1909, when he sold his controlling stock to J. Pierpont Morgan.
It was currently reported that Cravath persuaded Ryan that Hughes would be a safe man as Governor, but whether this report was true or not we cannot say. One fact much commented upon was that in its investigation the legislative committee avoided any genuine inquisition into the methods of industrial insurance companies. These companies fattened on the poorest and most industrious part of the population, extracting hundreds of millions of dollars in profits from the working class. However, Hughes record as exposer of insurance corruption was widely praised ; he was acclaimed as a typical example of the good man in politics.
Evidently the big financial magnates and capitalists had a deep appreciation of Hughes devout qualities, for they came forward in large numbers to contribute to the campaign fund of the Republican gubernatorial campaign, when he was a candidate for Governor, in 1906. J.P. Morgan and Company and Levi P. Morton each contributed $20,000. Andrew Carnegie, John D. Rockefeller, Jr., H.B. Hollins and E.M. Wells each contributed $5,000. Harvey Fisk and Son, Chauncey M. Depew, John W. Gates, J. and W. Seligman and Company, Kuhn, Loeb and Company, and sundry others each gave contributions of $2,500. Charles M. Schwab, Edwin Gould, Jacob Schiff, William H. Moore, Adolph Lewisohn and many other millionaires or multimillionaires each contributed $1,000 or $2,000. The total sum contributed was $313,923. Inasmuch as all of the aforesaid contributors were reputed to be extremely sagacious, practical men, it is quite clear that they were under no illusions as to the measure of Mr. Hughes.
Hughes Elected Governor.
After Hughes election as Governor of New York in 1906, certain pretentious laws of a reform nature were passed. Some were good in their way, but it was a negligible good. Laws were enacted to prevent the corrupt use of insurance funds, yet of what real avail are such laws as these in a fabric erected on corruption and sustained by it ? The statute books were already encumbered by laws prohibiting corruption. They were always evaded and never enforced. Moreover, even if corruption by the insurance companies were stopped, the saving of the millions formerly spent in corruption all the more enriched the magnates in control and gave them larger funds to manipulate. The policy holders were no better situated ; their premiums were as high as ever, and the conditions more or less as hard as before, although some slight relief was given in the abolition of the deferred dividend plan.
In fact, the great magnates continued to use the insurance money in their fraudulent trust and railroad operations. Harriman, by the end of 1907, had obtained from the Mutual Life Insurance Company not less than $10,000,000 loans on stocks largely watered, and the same company had invested $46,223,500 in securities of corporations controlled by Harriman. The surplus of the Equitable Life Assurance Society was put at Ryans disposal, in violation of one of the very laws Hughes had advocated and caused to be enacted. By the close of the year 1907 fully $27,048,517 of bonds and stocks of corporations controlled by Ryan had been sold to the Equitable. As for the New York Life Insurance Company it held, by the close of 1907, the enormous sum of $112,391,000 in securities issued by corporations controlled by Morgan. Inasmuch as it was contrary to the new insurance law for insurance companies to invest in stocks, the insurance companies explained that these enormous holdings of stocks were left overs of a time before the passage of the law. So far as the industrial insurance companies were concerned, Governor Hughes did not make a single move to remedy the evils bearing so heavily upon the working class.
Although the insurance investigation had disclosed that a large number of officials or capitalists controlling the companies had been guilty of perjury, fraud, mismanagement, corruption and theft, it was a subject of general comment that District Attorney Jerome, of New York City, who had been so signally active in sending petty offenders to prison, failed to bring about conviction and imprisonment of any high insurance official. Another scandal, too, was the immunity from serious prosecution of Ryan and his associates of the Metropolitan Street Railway Company who were specifically charged with having looted that company of at least $90,000,000 by duplication of construction charges, manipulation of accounts, and other involved series of thefts and frauds. This was the estimate made by Col. Amory in his Truth About Metropolitan, published in 1906.
When a candidate for District Attorney, in 1901, Jerome had publicly and repeatedly announced that he would follow the trail of corruption to the end, even if it lead to the offices of the Metropolitan Street Railway Company. But after his election and reëlection no results came.
Charges Against District Attorney Jerome.
On September 8, 1907, a voluminous petition was sent by New York business men and others to Governor Hughes making a scathing criticism of District Attorney Jerome for having failed to prosecute the traction looters, and demanding that the Attorney-General of New York State be directed to prosecute. This petition recited in detail the enormous frauds and thefts committed.
Evidence was submitted, on December 11, 1907, to the Grand Jury in General Sessions showing that Ryan and associates had bought in 1902 from Anthony N. Brady for $250,000 the franchise of a company called the Wall and Cortland Street Ferries Railroad Company, a corporation having a dormant franchise for a road never built. Then they had sold this franchise to a dummy corporation, called the Metropolitan Securities Company, for $965,607.19. Part of this went to the syndicates brokers ; the exact amount of loot divided among Ryan, Widener, Dolan and the estates of William C. Whitney and William L. Elkins was $692,292.82.21 The surviving members of this syndicate practically confessed their guilt by making restitution of this sum after the facts had been made public and after charges had been made against Jerome. On the very day that Ryan and associates had bought the non-existent Wall and Cortland Street Ferries Railroad they had also bought, for $1,600,000, the Peoples Traction Company and the New York, Westchester and Connecticut Traction Company, the franchises of both of which had lapsed. In this transaction there was, it was charged, another grand division of loot.
Assortment of Thefts and Corruptions.
These transactions, however, were insignificant compared to the theft of $16,000,000 from the treasury of the Third Avenue Railway,22 and vaster plunderings in other directions, totaling, as we have said, approximately $90,000,000.
The fact was brought out in the investigation by the Public Service Commission that all the books of the Metropolitan Street Railway Company in which its transactions from 1891 to 1902 were recorded were sold to a purchaser who promised to destroy them. Street car lines bought for a few hundred thousand dollars were fraudulently capitalized at ten or twenty times that sum, and then vast amounts were fraudulently charged in duplication of construction accounts.
Lemuel Ely Quigg (who had been for six years a member of Congress) admitted that in the four years preceding 1907 he had received $217,000 from the company. This was charged to a construction fund, part of which was another sum of $798,000 corruptly paid to persons whose names were concealed. Also by means of hired agents Quigg caused the organization of numerous citizens associations whose influence was used at Albany for or against pending measures in which his employers were interested.
Previous to the merger of the Ryan and Belmont interests, which merger was accompanied by an addition of $108,000,000 of watered stock, Quigg created citizens associations to oppose Belmonts designs ; subsequently he served the combination. His expenses, he said, ranged from $50,000 for manufacturing a great petition from the tenement-house district to $500 paid to individuals for agitation. Among those whom he employed directly or indirectly to make arguments at Albany were two men who had recently become Justices of the Supreme Court of New York State. Quigg also admitted that he employed detectives to watch Col. W.N. Amory, who was persistently exposing and denouncing the traction looters and corruptionists and demanding that they be prosecuted criminally. As a matter of fact Amory was not only watched but hounded and persecuted.23
The investigation by the Legislative Graft Committee, in 1910, supplied certain missing links, and disclosed who had received part of the corruption funds. The books of a Wall Street brokerage house, used as an intermediary, showed that State Senator Goodsell, Assemblyman Louis Bedell and other active members of the New York Legislature had received large sums, during the sessions of 1900-1904, from officers of the Metropolitan Street Railway Company.
But no criminal proceedings were brought against Ryan. In a statement published on May 26, 1909, Col. Amore charged that when a Grand Jury was called in 1907 to investigate the criminal practices of Ryan and associates of the Metropolitan Street Railway Company, the foreman of the Grand Jury was a director in Ryans Equitable Life Assurance Society.
Col. Amory also charged that in April, 1903, Daniel Mason, Jeromes former law partner, and William H. Page, Jr., another of the Metropolitans lawyers, had attempted to bribe him (Amory) while a States witness, with $200,000, to withdraw the charges that Amory had filed with Jerome against the Metropolitan Street Railway Company.
The particular Grand Jury investigating the matter of the $692,292.82 paid for the paper franchise of the Cortland and Wall Street Ferries Railroad Company, stated in its presentment :
That one of the questions that the Grand Jury was investigating was whether the said Thomas F. Ryan and others in connection with the sale of the said railway company had stolen the sum of $111,652.78. Of the particular item of $692,292.82 looted, the amount mentioned $111,652.78 was supposed to be Ryans share.
Paul D. Cravath, Governor Hughes former law partner, was in court zealously looking out for Ryans interests. Cravath had refused to answer certain vital interrogations, and the question came up whether be should be punished for contempt of court. He was not. During this time District Attorney Jerome, as he admitted at a hearing on May 7, 1908, on the charges against him, dined with Allan Ryan [one of Thomas F. Ryans sons] and his wife at Sherrys and Martins. Jerome said he was not a friend of the Ryan family, but I think young Ryan is a fine chap, but cant claim anything more than a pleasant acquaintance.
On January 27, 1908, Judge Rosalsky, in the Court of General Sessions, New York City, severely arraigned District Attorney Jerome, declaring that Jerome had so conducted the examination of Thomas F. Ryan before the Grand Jury as probably to invalidate any indictments which that body might have found against Ryan.
Governor Hughes appointed a commissioner to hear the evidence upon which the charges against Jerome were made. Jerome admitted that when Ryan, Brady and Vreeland were before the Grand Jury he had asked leading questions of them. He further testified that he had not asked the Grand Jury to indict Ryan in the matter of the Wall Street and Cortland Street Ferries Railway transaction. No, he said, I will never advise that an indictment be found in that case. But an inspection of the minutes of the Grand Jury of November, 1907, disclosed that Jerome had told Brady that he (Brady) and Ryan and Whitney and this outfit were in cahoots and in some way got $700,000 of the Metropolitan Securities money. You are, practically every one of you, under suspicion and accused of being thieves. . . . At the hearing Jerome was asked as to a certain contribution made to his political campaign by Samuel Untermeyer, counsel for Hyde of the Equitable Life Assurance Society, but he denied that any ulterior purposes were behind it. Ryan had admitted on the witness stand that he (Ryan) had contributed $500,000 to the national Democratic Party in 1900.
Hughes Exonerates Jerome.
The Commissioners report whitewashed Jerome, and Governor Hughes dismissed the charges, saying : Nothing has been presented which furnishes any just ground for impeaching the good faith of the District Attorney in connection with any of the transactions set forth nor has anything been shown which would justify his removal from office.24
In 1910 came the disclosures before a legislative committee revealing the consecutive briberies and corruptions carried on in the New York Legislature by the Metropolitan Street Railways officials, by fire insurance companies and by other corporations. Ten of the principal legislators implicated were the very same who for years had ruled Senate and Assembly committees.
The Obliging Judge Lacombe.
In the meantime, learning that Attorney-General Jackson of New York State contemplated throwing the looted railway system into the hands of receivers, Ryan and associates hurried to apply for the appointment of Adrian Joline and Douglas Robinson as receivers. Joline was an old attorney of the Metropolitan Street Railway Company, and Robinson was President Roosevelts brother-in-law. Lacombe granted the application, thus forestalling the attempt of Attorney-General Jackson to put in receivers hostile to Ryan and associates. Judge Lacombe was a protégé of William C. Whitney, and had been placed on the Circuit Court by Whitneys efforts.
In the course of his remarks before the Public Service Commission, in November, 1910, Col. Amory unsparingly denounced Judge Lacombe. There is a Judge on the bench, he said, who has protected these criminals. He is the creature of William C. Whitney and the tool of Thomas F. Ryan. . . .
There has been a plan successfully put on foot to keep the traction thieves from prison and from disgorging the millions they have made away with.
Ryan still controls the street railways of this city. Back of these receivers who defy the Public Service Commission, and treat it with contempt and ignore the laws of the State is Judge Lacombe . . . and back of Lacombe stands Ryan.25 When Judge Lacombe was challenged to make a categorical reply he refused.
Some time ago the statute of limitations intervened to prevent any possible prosecution of the traction looters, which was precisely the point that they were fighting for so desperately. They are now immune. Ryans fortune is estimated to be more than $225,000,000. His great African concessions of domain, with incalculably rich resources, which he secured in association with the late King Leopold of Belgium and others, may signify that his private fortune is perhaps double that sum.
Rule of Reason Speech.
When occupying the office of Governor of New York State (in which he served two terms, having been reelected in 1908), Hughes did nothing at basis to antagonize, and much to will the favor, of great corporate interests. Quite true, his churchbred opposition to vulgar gambling asserted itself in his causing to be enacted a statute forbidding the operation of racetrack gambling, for which deed he was much praised by pious people. These good folk, however, were not at all concerned about stock-market gambling, and neither was Governor Hughes. Reforms of the race-track sort did not touch the fundamentals of society, and were, therefore, safe and sane. At the same time Governor Hughes opposed or vetoed certain measures affecting large corporate interests. He found objections to the constitutional amendment providing for an income tax. He vetoed the two-cent railroad fare bill, the five-cent Coney Island fare bill and other measures. And when President Taft appointed him to the Supreme Court of the United States, no opposition was manifested by any prominent capitalist interest. Indeed, William J. Bryan, three times Democratic candidate for President of the United States, openly charged Taft with packing the Supreme Court with pro-trust men. In a statement published on October 12, 1911,26 Bryan asserted :
In its 1908 platform the Republican party promised to amend the Sherman Anti-Trust Law. During the campaign of 1908 Governor Hughes, of New York, interpreted that promise to mean that the Rule of Human Reason must be accepted.
Later Taft appointed Governor Hughes, as well as other men of his mold of thought, to the United States Supreme Court.
George W. Perkins, associated with J.P. Morgan in trust control, delivered a speech recently in which he complained that Republican Congressmen had not tried to redeem their platform promise, but that it had been redeemed by the Supreme Court in the recent trust decision wherein Governor Hughes Rule of Reason was applied.
Here we have it. Governor Hughes was put forward to represent the Republican Party ; he assured the trusts that the Rule of Reason for which they had been waiting for more than ten years would be adopted. Congress refused to keep the promise, so Governor Hughes was put on the Supreme Bench and helped to amend the law in accordance with the Republican promise, and now President Taft, in whose interest the promise was made and who appointed Governor Hughes, says that the Anti-Trust law as amended by the court must not be disturbed.
Here is a chain of circumstantial evidence sufficient to convict in a criminal court.
In another statement, published on October 20, 1911, in the form of an open letter to President Taft, Bryan accused Taft of having appointed pro-trust men to the Supreme Court. You appointed to the Chief-Justiceship of the Supreme Court Justice White who thirteen years ago took the trusts side of the trust question. You appointed him over the head of Justice Harlan who had served longer and with more distinction and who had taken the peoples side on trust questions. . . . You appointed Governor Hughes to the Supreme Court Bench after he had interpreted your platform to suit the trusts and proceeded to join Chief Justice White and carry out your platform promise to amend the Anti-Trust law by weakening it. . . . Bryan asked Taft to make public the recommendations, written and verbal, upon which he had made these and other appointments and let the people know the influences that dictate your appointments.
President Taft replied weakly and evasively, saying that he considered the questions an insult to the Supreme Court of the United States.
Had President Taft been bold enough to have expressed the facts as clearly as he knew and adapted them, he would have said that Bryans charge was a compliment, not an insult. The trusts were the dominant economic factor of the day ; being so, why should they not have their representatives on the Supreme Court Bench as well as in other departments of Government ? The processes of the capitalist system, for which Government is merely a registering machine, made this inevitable. Moreover, as we have previously pointed out, the trusts were a necessary outcome of the capitalist struggle, and represented a higher form of industrial organization than the abandoned competitive stage, which Bryan, the mouthpiece of his fading class, has the blindness and folly to wish to see restored. For the ends of progress it was, indeed, salutary that Taft should have appointed pro-trust judges. Finally, it was not Taft that essentially decided affairs, but the great force of magnates owning the resources and industries not only of the United States but of other parts of the world.
Justice Van Devanter.
Associate Justice Moody resigning,27 President Tafts next appointment to the Supreme Court of the United States was Willis Van Devanter. He was born in 1859 ; his father was a lawyer of means at Marion, Indiana. Quitting that town, in 1884, Willis Van Devanter settled at Cheyenne, Wyoming. A Territory at that time, Wyoming was sparsely settled, and its politics were controlled by the Union Pacific Railway Company and by sheep and cattle ranchers, both of which interests were seizing natural resources on every hand. Among the men conspicuous in Wyoming politics was Francis E. Warren, a former stock raiser in Massachusetts, and Clarence D. Clark. Warren was Territorial Governor, and he became the owner of extensive ranches, often by methods a description of which would form too intricate a digression here ; lands that had been public property were converted into Warrens private estate. To Warren and Clark the youthful Van Devanter closely adhered.
Van Devanter became the City Attorney of Cheyenne ; he was then elected to the Legislature ; and when Wyoming was admitted as a State, he was elected Chief Justice of the Wyoming Supreme Court, for four years. But he resigned in the year 1890, and became a member of the law firm of Lacey and Van Devanter. This firm had previously been that of Corlett, Lacey and Riner. W.W. Corlett had been for more than twenty years an attorney for the Union Pacific Railroad, and had represented that railroad in a large number of cases. Likewise lead the firm of Corlett, Lacey and Riner. Corlett had also teen the attorney for large irrigation and lumber companies such as the Hilliard Flume and Lumber Company.
Conditions in Wyoming.
The fraudulent acquisition of land in Wyoming was great and incessant. In his exhaustive report for 1885, Commissioner Sparks of the United States General Land Office related how nearly the whole of Wyoming and a large portion of Montana had been fraudulently surveyed, and the lands on the streams fraudulently possessed under the desert land act, to the exclusion of actual settlers. Extensive coal deposits had been, or were being, fraudulently acquired in mass through expedited surveys, followed by fraudulent pre-emption and commuted homestead entries.28 Much, if not all of these available coal deposits had been seized under color of law by men acting for Jay Gould, controlling the Union Pacific Railroad.29 The Pacific Railway Commission reported, in 1887, that the Union Pacific Railway Company had fraudulently appropriated coal lands of inestimable value, and that of the vast area of lands which it had grabbed it had sold not less than 7,000,000 acres without any patent from the Government.30 The fraudulent processes of acquiring Wyoming coal lands are detailed at great length in other official reports.31
As for the fraudulent seizures by cattle companies in Wyoming as well as elsewhere in the West, only a few suggestive details of a mass can be given here. In Wyoming, reported Acting Commissioner Harrison of the General Land Office to Secretary of the Interior Teller, on March 14, 1884, one hundred and twenty-five cattle companies are reported as having fencing on the public lands ; the Wyoming Cattle Company, composed of Scotch capitalists, was one of these companies.32
These operations went on without cessation. Seventy-eight desert land entries, reported S.M. Stockslager, Commissioner of the General Land Office, in 1888, embracing 48,000 acres, were entered in the Cheyenne District, Wyoming, and transferred immediately after proof to a land and ditch company, which had been previously organized for the purpose of acquiring title to said lands. Most of the entry men lived in the Eastern States and had never seen the land, nor did they make any expenditure thereon. The purchase money and all other expenses were paid by the company who evidently used the names of the entrymen in making the entries.33
These details selected from a great number, give some slight picture of conditions in Wyoming during the years when Van Devanter was an attorney and judge. From 1891 to 1895 the firm of Lacey and Van Devanter consecutively represented the law interests of the Union Pacific Railway.34 They also were attorneys for the Powder River Cattle Company, the Searight Cattle Company, the Frontier Land and Cattle Company, the Springvale Ditch (Irrigation) Company, the Moorcraft Ranch Company and other companies.35
The Artist Case.
Van Devanter, it seems, was also associated with John M. Thurston, a Nebraska politician and a United States Senator from that State. The proceedings in the case of Union Pacific Railway Company vs. Artist give the names of Willis Van Devanter and Thurston on the brief submitted for the railroad.36
This case and its disposition deserve narration. On October 4, 1889, Andrew S. Artist, a Union Pacific Railway worker, was injured while at work ; his foot and leg were badly hurt. He was taken to a hospital maintained at Denver by the company for its employés. To support this hospital the Union Pacific forced each one of its employés to contribute twenty-five cents a month ; if any additional amount was needed, the company contributed it.
In the course of the treatment of Artist at the hospital the physicians inserted a rubber drainage tube in his leg. It was admitted that because of the carelessness of physicians or attendants a portion of the tube was left in the leg as the wound healed and it remained there when he was discharged as cured, on January 7, 1890. The result of this malpractice caused Artist great suffering and partial disability until the remnant of the tube was removed by a surgical operation in April, 1892.
Now on January 13, 1890, six days after his discharge, at a time when both parties were ignorant of the fact that a piece of tube remained in the leg, Artist, in consideration of receiving $150, had been induced to sign a release from damages.
But after suffering for more than two years and being reduced to partial disability because of the blunder at the hospital, Artist brought suit for damages and obtained a judgment in the lower court.
Thurston and Van Devanter appealed the case for the Union Pacific Railway to the United States Circuit Court of Appeals, District of Wyoming. On February 12, 1894, Judge Sanborn reversed the judgment given in the lower court. Notwithstanding the uncontested fact that the railroads employés were compelled to contribute twenty-five cents a month to the hospitals maintenance, Judge Sanborn decided in favor of the Union Pacific Railway Company on these remarkable grounds :
That a master who sent his servant for treatment to a hospital maintained by the master for charitable purposes (!!) was not responsible for injuries caused to the servant by the negligence of hospital attendants, where the master has exercised ordinary care in selecting such attendants. Further, that a hospital maintained by the railroad company for the free treatment of its employés, and supported partly by monthly contributions of employés and partly by the company, and maintained for profit, is a charitable institution.37
Thus, although the compulsory contributions of the railroads workers supported the hospital, they had no voice in the managing of it, and were virtually adjudged paupers debarred from getting damages for the malpractice of physicians. We have given this case and extraordinary decision exactly as the facts are stated in the court records.
Van Devanters patrons and pushers, Warren and Clark, became United States Senators. Van Devanter had been of great assistance to them ; he had been chairman of the Wyoming Republican State Committee in 1892, a delegate to the Republican National Convention and a member for the Wyoming Republicans on the Republican National Committee in 1896.
Through the influence of Senators Warren 38 and Clarke, Van Devanter, in 1897, was appointed by President McKinley an assistant United States Attorney-General, and was assigned to the Interior Department which, it is needless to say, had jurisdiction over the public lands.
In 1903 a vacancy occurred on the bench of the Eighth Judicial Circuit. Warren and Clarke were now high personages in the Senate and of great influence at the White House ; Warren headed the Senate Committee on Military Affairs, and Clark was chairman of the Senate Committee on judiciary. Responsive to their suggestions, President Roosevelt appointed Van Devanter to the Circuit Court where he sat with Judge Sanborn, the identical judge who had decided the Artist case nine years previously when Van Devanter and Senator Thurston represented the Union Pacific Railway.
Judge Van Devanters appointment to the Supreme Court of the United States was severely and pointedly criticized by W.J. Bryan, in one of the series of statements and speeches recently issued by him. In a speech at Lincoln, Nebraska, on November 5, 1911, Bryan asserted that Van Devanter was appointed by President Taft because of his known bias in favor of the dominant corporate interests. Judge Van Devanter, Bryan asserted, is the man who gave a decision giving to the Union Pacific Railroad land along the right of way amounting in value to millions of dollars ; he is the judge who held that two railroads running parallel to each other for two thousand miles were not competing lines, one of the roads being the Union Pacific Railroad. Bryan continued :
President Taft knew of these decisions, for he was notified by letter before he made the appointment, and the man who wrote received a letter from the Presidents secretary saying the information would receive consideration.
And in spite of the fact that the President knew that Van Devanter was biased in favor of the great interests, he appointed him to the Supreme Bench. Upon whose recommendation was the appointment made ? Will President Taft make this information public ?
I have read the President does not like being questioned by me concerning the Supreme Court appointments, and that he has said the questions are an insult to him and to the judge as well. I have to say that if President Taft is that thin-skinned he will have to get used to it, for I will have considerably more to say before I am through with the subject.
Reporting Tafts appointment of Van Devanter, a Washington dispatch published in a friendly partisan newspaper, the New York Press, issue of December 12, 1910, stated, It was said to have been Mr. Knoxs influence which finally turned the tide in favor of Judge Van Devanter as against Judge William C. Hook, also of the Eighth Circuit. The Knox referred to was Philander C. Knox, former attorney for the Carnegie Steel Company, whose appointment as Attorney-General of the United States, Andrew Carnegie, the powerful multimillionaire magnate, had recommended to President McKinley, and whose former law partner, Judge Reed, has been so large a factor in the Directorate of the mighty Steel Trust.
Knox has been a sort of premier under the three administrations of McKinley, Roosevelt and Taft ; and in view of the Supreme Courts Rule of Reason decision (described later in this chapter) it is significant that Knox, in a speech delivered before the Pittsburg Chamber of Commerce, on October 14, 1902, outlined virtually the very doctrines that the Supreme Court of the United States adopted, nearly nine years later, in its Rule of Reason decision applying to the trusts. Thus can glimpses be obtained of the powerful capitalists, or their spokesmen, asserting the construction of laws that they wanted and needed, and thus also can be seen how decisions have precisely followed these requirements.
Of all of the appointments to the Supreme Court of the United States by President Taft that of Joseph R. Lamar, of Georgia, provoked least criticism, because so little was known of his career.
Justice Lamar as Railroad Attorney.
Judge Lamar was born in 1857 ; his father was a Campbellite preacher at Augusta ; his maternal grandfather was Joseph Rucker, owner of eleven hundred slaves. The Judge was a second cousin of L.Q.C. Lamar, of Mississippi, whose career both before and after his appointment as an Associate Justice of the Supreme Court of the United States has been depicted in a previous chapter. In his practice of law at Augusta, Joseph R. Lamars clientele seem to have been largely corporate interests.
One of the most conspicuous of his cases was that of the Central Trust Company of New York vs. the Marietta and North Georgia Railroad Company. Lamar represented the Central Trust Company, one of the most powerful of such companies in the United States. The action was brought by the Central Trust Company to foreclose on an extensive mortgage it held to cover an issue of bonds of the Marietta and Georgia Railroad Colnpany.40
In 1903 Lamar was appointed to the State Supreme Court of Georgia. After his resignation from that court he reëntered law practice at Augusta, forming a partnership with Judge E.H. Callaway under the firm name of Lamar and Callaway. Not long before his appointment to the Supreme Court of the United States he was one of counsel for the Central of Georgia Railway Company in a case the decision in which by the Supreme Court of Georgia was regarded in financial-railway quarters as epoch-making.41
Previously it had been generally ruled by the courts, especially in New York, that an income bond practically gave the holder no greater rights to interest than the stockholders to dividends. The courts, these rulings had further held, could not, save in exceptionally scandalous cases, interfere with the decision of railroad directors not to pay dividends. The Georgia Supreme Court, however, held that the courts would determine for themselves whether the income was really earned regardless of what action the directors took. Wollmans account of this case proceeds :
In the Georgia case there were many discussions as to what was income. I will refer only to two. The railway company owned all the stock of a money-earning steamship company. The steamship company paid the railroad company, its sole stockholder, a large sum of money, but did not say that it paid it as dividends ; in fact the steamship companys directors did not declare any dividends. The money was unquestionably paid in lieu of dividends, and the failure to call it dividends was probably a mere device. The court wisely held that this large amount should be considered as part of the income of the railroad company. On the other hand, the court held against the income bondholders, on their contention that the directors had no right to charge against income amounts paid for equipment.
Judge Lamar, who has just been appointed Justice of the United States Supreme Court, was of the counsel for the railway company [the Central of Georgia Railway Company].
Moody, in his exhaustive work issued in 1904, placed the Central of Georgia Railway System in the group of railroads controlled by J. Pierpont Morgan.42 This system included 1,877 miles and was capitalized at $54,146,000. In turn it was controlled by the Southern Railway Company (controlled by Morgan) with its $365,755.265 capitalization. Special Report No. I of the Interstate Commerce Commission, March 10, 1908, detailed the close connection between the Southern Railway Company, the Louisville and Nashville Railroad Company, the Central of Georgia Railway Company, the Atlantic Coast Line and many other railroads.43
While controlling these vast railroad systems, Morgan, at the same time, controlled or dominated some of the most powerful industrial and commercial trusts. The great Steel Trust was organized by him, likewise the Shipping Trust, and he acquired control or interest in many other trusts of vast resources and proportions.
As a result of the decision of the Supreme Court of Georgia, committees representing Central of Georgia Railroad bondholders arranged, in December, 1910, to sell the bonds deposited with them to the Illinois Central Railroad which, it is said, now controls the road through stock ownership.
The last important case in which Judge Lamar appeared before his appointment to the Supreme Court of the United States was as the principal counsel for the Atlantic Coast Line Railroad. This case was argued before the Supreme Court of the United States on October 19 and 20, 1910.44 It was an action on the part of the Atlantic Coast Line Railroad, plaintiff in error, to attack the twentieth section of the Hepburn Interstate Commerce Act on the plea that the initial carrier was not responsible for the action of all subsequent carriers for damages to freight. One of the assistants of Attorney-General Wickersham in arguing for the Government was John Maquard Harlan, a son of Justice Harlan. The Supreme Courts decision given out on January 3, 1911, and written by Justice Lurton, upheld the Hepburn Act and denied that it interfered with liberty of contract.45
Parenthetically, another decision of the Supreme Court of the United States delivered by Justice Lurton later in the same year (Dec. 18, 1911) may be here referred to. This decision affirmed a decision of the Supreme Court of Illinois to the effect that the City of Chicago was liable to railroad companies for damages suffered by firms or corporations in the great railroad strike of 1894. The particular sum of damages recovered in this case was $425,500. As a matter of law there was nothing astonishing in this decision ; it simply reaffirmed statutes and court precedents that public treasuries would have to stand indemnity for losses caused by mobs and riots. But in point of fact the mischief done in that strike was due not to the strikers, but (as the testimony before the special commission appointed by President Cleveland showed) to United States deputy marshals and deputy sheriffs many of whom were drunk and provoked trouble and even committed robberies. The commission reported that no violence or destruction of property was done by the strikers or their sympathizers at Pullman, and that no disorder could be traced to them. This report was easily available as a public document, but the decision of the Supreme Court reveals no familiarity with its findings. The whole burden of the decision was to place the responsibility upon riots and mobs.46
Rule of Reason Applied.
Of other recent decisions of the Supreme Court of the United States only five will be referred to here. Those in the Standard Oil Company and Tobacco Trust cases will be considered first. These decisions are so freshly in memory and of such common knowledge that but the briefest description will be given of their pertinent points.
The Supreme Court decreed that both trusts should undergo a form of dissolution but the reorganization, so-called, while nominally splitting these trusts into a number of apparently separate components, does not in reality efface the trusts. This pseudo dissolution has been admitted by those familiar with methods of trust operations to be a farcical makeshift. Moreover, by putting the trusts to some trouble in the dissolution process, the grounds were supplied for an agitation in favor of Federal incorporation, which is to say, legalizing of trusts.
But the important, historic thing that the Supreme Court did in making these decisions was to introduce an entirely new principle into law a principle arbitrarily promulgated yet in accordance with the demands of industrial evolution. No power but the Supreme Court of the United States could or would have ignored the plain meaning of a statute of Congress, and construed that law to mean something far different than what it actually said. The Sherman Anti-Trust Act says that every combination in restraint of trade is illegal. Nor has that law ever been repealed. But by a stroke of the pen the Supreme Court of the United States boldly and arbitrarily amended it by simply holding that Congress meant to say that every combination in undue restraint of trade was illegal. No longer, therefore, are trusts sweepingly condemned in one category ; the Court distinguished and pointed out the way to the gradual legalization of trusts. To prove a trust to be criminal it was now necessary to prove that it was an undue or unreasonable trust. This was the now famous Rule of Reason pronounced by the Supreme Court.
Justice Harlan who, as we have said, was a reactionary regarding almost every question but that of the Negro race, pointed out in his dissenting opinion that this construction amounted to an amendment of the law rather than merely an interpretation, and that it constituted an usurped legislative act on the part of the Court. He did not understand that economic forces govern mens actions, and that the dominant interests of a time will infallibly have their will expressed in law, whether legislative law or court law. Illegality of proceeding or usurpation of power never troubles the dominant class or the representatives of that class. They who have the economic might command all other kinds of might, and their demands are put into effect, if not by one means, then by another.
This was the last important decision in which Justice Harlan participated. He died on October 14, 1911, aged seventy-eight years. For nearly thirty-four years he had served on the Supreme Court of the United States, and the total estate that he left amounted to but $13,000, of which $7,200 was in life insurance.
Employers Liability Act Upheld.
The third recent decision in question was the Supreme Courts decision, on January 15, 1912, holding that the Federal Employers Liability Act passed by Congress was constitutional. This law provides that such doctrines as the fellow servant defense used by corporations shall no longer apply to cases of injuries sustained in interstate commerce. The distinction, however, between interstate and intrastate commerce is of the most vital importance ; to avail himself of the benefits of the law, the injured worker will have to prove that he was not engaged in intrastate commerce, which is to say, commerce within the boundaries of a State. And what new doctrine will be advanced by corporation attorneys to defeat the workers remains to be seen ; without doubt some effective plea will be invented for the purpose.
The decision of the Supreme Court validating this law was written by Justice Van Devanter. It held that Congress had full power to enact such a law, and that Federal statutes on the subject were superior to State laws. Recalling that the Supreme Court had declared a similar law, passed in 1906, unconstitutional, the skeptical asserted that the Supreme Court, despite its professions of lofty aloofness, carefully followed the election returns, and was not unmindful that the important Presidential election of 1912 was in sight. Such an assumption would imply that realizing the stern, organized awakening of the working class, the policy had been begun of presenting sops in order to prevent that movement from developing into a mighty revolutionary force.
Perhaps this implication is not incorrect. But prudence, bred of knowledge and experience, demands that before arriving at any solid judgment, it may be well to wait and see what other decisions in the near future follow this precedent. One of the precedents cited by Justice Van Devanter was the decision of Chief Justice Marshall in the case of McCulloch vs. Maryland, in which case Marshall sustained the constitutionality of the chartering by Congress of the Bank of the United States. Significantly, the great capitalist interests have been recently agitating for two laws in particular one law legalizing the trusts, and another law chartering a Central Bank ; and if these laws are passed, as they doubtless will be if the magnates remain in control, the Supreme Court will be called upon to pass upon their constitutionality, and expected to give another application of the Rule of Reason.
Initiative and Referendum Valid.
The fourth important recent decision was that of February 19, 1912, in which the Supreme Court of the United States decided, in the case of the initiative and referendum law adopted by the people of Oregon, that it had no jurisdiction to pass upon the validity of that law, and that a law of such a purely political character was subject solely to the judgment of Congress. By implication, therefore, the law was pronounced constitutional. The question of the validity of similar laws in ten other States depended upon this decision.
It is known that during the time when the test action in this case was under consideration by the Supreme Court of the United States, the members of that court were individually swamped with a deluge of letters from a large number of people throughout the country demanding that the initiative and referendum law be declared valid. Did this remarkable and unprecedented demonstration of popular will have its effect upon the Justices ? At the same time, the agitation for the recall of judges had assumed deep national proportions ; and when Senator La Follette, in his speech during this time at Carnegie Hall, asserted that he even favored the recall of the Justices of the Supreme Court of the United States, he was wildly applauded. Whatever was the nature of the deliberations of the Supreme Court that led to this decision, the supporters of that Court immediately, when the decision was announced, used that decision as a prime argument why the recall of judges should not be adopted.
But shortly after the foregoing decision, another decision of a vastly different character followed. In this particular decision, handed down on March 11, 1912, the power of the trusts was greatly enlarged and entrenched, and the prohibition of the Sherman Anti-Trust Act against restraint of trade was partially nullified.
By a majority of one seven Justices participating the Supreme Court of the United States held that a patentee could not only dictate prices for the patent, but also the conditions of sale and use.
Theoretically, the patent system was devised for the protection of the individual inventor ; as a matter of well-known fact, however, nearly all of the trusts and large corporations appropriate for themselves the inventions of employés, rarely, if ever, paying their salaried workers any extra remuneration for the inventions. Patent rights form, to a considerable extent, the bases of many of the industrial trusts ; and in the recent actions of the Government against various of these trusts, a vital point of the prosecution dealt with monopoly of patent rights. These actions, it is worth noting, were under way at the very time that the Supreme Court thus virtually decided that the owner of a patent had an unrestricted monopoly on all articles used in its operation, and could fix its price and prescribe its use.
Justice Lurton delivered this extraordinarily generous and sweeping decision ; McKenna, Holmes and Van Devanter concurred. Chief Justice White unsparingly denounced it, Justices Hughes and Lamar joining in his dissenting opinion. It was a decision that could have been expected from Lurton ; he had, in 1896, when a Circuit Court judge, given a similar decision in what was called the button fastener case, on which occasion Judge Taft (now President) and Judge Hammond, comprising the judges of the Sixth Circuit, had concurred with him.
Appointment of Chancellor Pitney.
Harlans successor, nominated by President Taft, on February 19, 1912, was Mahlon Pitney, Chancellor of the Court of Appeals of New Jersey. It is under the accommodating laws of New Jersey that nearly all of the largest industrial trusts are incorporated, and as Chancellor of the Court of Appeals of that State Pitney had every opportunity to become thoroughly familiar with the legal aspects of the trust question. The Standard Oil Company, the Steel Trust, the Tobacco Trust, the Sugar, Beef, Copper, Whisky, Machinery, Tin Can, Harvester, Rubber, Leather, Cotton Oil, Cotton Yarn, Cotton Duck, Felt and Smelter Trusts are a few of the great number of trusts incorporated under the laws of New Jersey. Actions concerning many of these trusts have, from time to time, occupied the courts of that State.
When nominated as Associate Justice of the Supreme Court of the United States, Mahlon Pitney was fifty-four years old. His father, Henry C. Pitney, had been a Vice Chancellor of New Jersey. Admitted to the bar in 1882, Mahlon Pitneys first notable client as well as friend was George Richards, a very rich man reckoned a millionaire, in fact of Dover, New Jersey. Later, Pitney lived in Morristown, that essentially plutocratic town which has the reputation of having at least 100 millionaires as residents ; and there Pitney was situated when appointed to the Supreme Court. Elected to Congress in 1895, and reëlected, he resigned in 1899, having been elected to the New Jersey Senate of which he became President. He became a judge of the New Jersey State Supreme Court, in 1901, and in 1908 was appointed Chancellor of New Jersey.
Upon the announcement of Tafts selection of Pitney for the Supreme Court of the United States, labor organizations denounced Pitney for decisions in which peaceful measures by the trade unionists in their struggle for better conditions were held to be illegal, but Chancellor Pitney explained that one of the decisions thus criticised had been delivered orally by his father, Vice Chancellor Henry C. Pitney, in 1903. In the case of another decision rendered recently in the glass blowers strike, declaring it to be unlawful for strikers to use peaceful persuasion and picketing, Chancellor Mahlon Pitney said that this decision had been written by Vice Chancellor Bergen. But Pitney admitted that he had affirmed this decision in an opinion in which he had declared persuasion unlawful and actionable. In defense of his action he went back into the precedents of the moldy past, when law was expressly aimed to prevent the workers from organizing ; he cited Blackstones commentaries, several cases in English law, and some decisions of the United States Courts.
However, there could be no mistaking the gratification that his nomination aroused among the great capitalist interests ; the pro-trust newspapers and the capitalist press in general acclaimed his appointment, and he received congratulatory telegrams from judges, United States Senators and other approvers, all known for their devotion to the existing capitalist system, and for their exaltation of the supereminence of large property rights.
When Pitneys nomination came before the United States Senate, that body, for three successive days, in executive session, discussed his record. His opponents severely attacked him for a decision enjoining workers from doing such lawful and innocent acts as picketing during a strike and from persuading other workers not to take the strikers places in the mills. But criticisms that he was inimical to the workers only the more heightened Pitneys prestige and strengthened his cause in the Senate composed as it largely was, and is, of multimillionaire magnates or of the outright retainers and covert servers of the great capitalist interests ; his nomination was confirmed, on March 13, 1912, by (it was learned) a vote of fifty to twenty-six.
Compared to the splendor of the residences of his neighbors, Pitneys house in Morristown is modest. The only mark of luxury in his manner of living, says an account, is in the big black automobile sometimes to be seen standing at his door. The house is a brown-shingled little place that hardly exceeds the size of a large bungalow, standing inconspicuously among many other more pretentious residences on Collis Avenue, not far from the enormous, castle-like Robert H. McCurdy residence.
Trust Magnates Triumph.
What did the Rule of Reason signify ? It denoted the final triumph of the few but all-powerful trust magnates controlling the resources of the country, and the submergence of the remaining sections of the industrial middle class.47 For decades this middle class had fought persistently and stubbornly for self-preservation. It deluded itself into the belief that it had statute law on its side, but the Supreme Court of the United States, worthy representative of the dominant capitalist group of the era, disillusioned it by decreeing that the very statute upon which the middle class relied, meant some thing very different from what was supposed. The Rule of Reason was an historic utterance far more historic and significant of vast changes in society than was currently thought. The next application of the Rule of Reason will be made by the organized working class in its own interests to the end that it will expropriate its expropriators.
1 Some of these facts have been described in previous chapters ; others will be referred to later in this chapter. One of Ryans transactions that may be mentioned here was a loan of $2,000,000 made by the State Trust Company to Ryans office boy, D.F. Shea ; such a loan was forbidden by the laws of the State of New York, and in consequence was a criminal transaction.
On another occasion when proof had been presented to the banker Jacob H. Schiff that he had been grossly deceived, he compelled Ryan to relieve his (Schiffs) firm, Kuhn, Loeb and Company of its holdings of Metropolitan Securities Company stock, amounting to about $6,000,000. If Mr. Ryan, says Col. Amory, had not been a very rich man, indeed, his embarrassment in satisfying Mr. Schiffs peremptory demands would have been extreme. Truth About Metropolitan, p. 45.
2 See Supreme Court Reports, N.Y., Vol. 62 : 224.
3 Supreme Court Reports, N.Y., Vol. 62, pp. 222-245.
4 a Controlled by the Bell Telephone Company.
5 See Minutes of the Board of Electrical Control, Vol. I, July, 1887, to Dec., 1890, p. 824.
6 Ibid., 889.
7 Considering that Choate and Cravath represented the same clients in the above case, it is worth noting here that it was Choate who, twenty years later, in open court, severely denounced Cravath. This incident occurred on January 25, 1910, in the United States Circuit Court at New York, before Judge Ray. The occasion was a suit over the financiering of the traction lines in New York City. Choate excoriated the magnates responsible for the long-continued looting of the traction lines and the ensuing corruption. As the attorney for these looters Cravath was not spared in the scathing denunciation.
8 Minutes of the Board of Electrical Control, Vol. I, etc., 824, 826, 917, and 1007. This company fixed a certain rental for the use of its ducts. Refusing to pay it, the Brush Electric Illuminating Company was threatened with eviction. Representing the Brush Company, Cravath, in June, 1891, applied for a preliminary injunction against the Consolidated and Electrical Subway Company. The application was denied, and so was the appeal following. James C. Carter, Frederick R. Coudert and Edward Lauterbach appeared as the attorneys for the Consolidated and Electrical Subway Company, Supreme Court Reports, N.Y., Vol. 67 : 446.
9 Argument of Simon Sterne before the N.Y. Senate Committee on Cities, Feb. 5 and 19, 1895, p. 6.
10 Moodys The Truth About The Trusts : 415. Also see testimony in the recent hearing before the Public Service Commission, First District, New York, Public Service Commission : Electric Lighting Investigation, Vol. IV : 1510, etc., etc. This testimony showed that the United States Illuminating Company, the Brush Electric Illuminating Company, the Edison and other companies were merged, in 1890, in the United Light and Power Company which in turn was controlled by the Consolidated Gas Company.
11 The New York Central controls the old New York and Harlem River Railroad which owns the franchise to operate on Park Avenue.
12 See, Minutes of the [N.Y.] Board of Estimate and Apportionment, 1904, Vol I : 471.
13 From the New York Times, issue of January 19, 1908 : A noted corporation lawyer, speaking of Mr. Hughes, said that he was not money maker and was one of the few lawyers who consulted their clients as to the size of his fees. The article further stated of Hughes that when he became a candidate for Governor of New York (in 1906) it is doubtful whether he was worth more than $100,000.
14 Minutes of the [N.Y.] Board of Estimate and Apportionment, 1904, Vol. I : 1089, 1094, etc.
15 These were duly published in the Minutes of the Board of Estimate and Apportionment, 1904 : 471, etc.
16 Minutes of the [N.Y.] Board of Estimate and Apportionment, 1904, Vol. I: 1089.
17 Ibid., 1094.
18 Chap. 579, Laws of 1909.
19 Consolidation Agreement, p. 15.
20 Consolidation Agreement, p. 9.
21 These facts were testified by Brady, on October 8, 1907, in an inquiry conducted by Chairman Wilcox of the Public Service Commission.
22 So Receiver Whitridge of that company stated. And see Col. Amorys remarks, June 29, 1910, Third Avenue CompanyPlan of Reorganization, Public Service Commission, Stenographic Minutes, p. 2417.
23 Investigation of Interborough-Metropolitan Company, Etc., Public Service Commission, 1907, pp. 1395-1559.
24 Col. Amory did not think that Jerome had been corrupted by means of money. When the day of retribution comes . . . wrote Col. Amory, on March 18, 1906, . . . It will then be disclosed that there are other than money bribes. I believe Mr. Jerome incapable of doing a corrupt act for money. Truth About Metropolitan, p. 2. In the same pamphlet Col. Amory stated that Jerome knew specifically of the vast plunderings as early as 1903 and, that he had then encouraged Amory to believe that the looters would be prosecuted.
25 Reorganization Plan, Public Service Commission Hearing, Stenographic Minutes, pp. 2407-2409.
26 Published originally in Bryans periodical The Commoner, and republished in the newspapers.
27 We have previously related how when Justice Moody resigned, Senator Lodge succeeded in having a bill passed by Congress granting him a pension of $12,5oo a year.
28 House Executive Documents, First Session, Forty-Ninth Congress, 1885-1886, Vol. II : 167.
29 The Interstate Commerce Commission reported to the United States Senate in 1908 that the acquisition of these coal lands had been attended with fraud, perjury, violence and disregard of the rights of individuals. The report stated the specific methods used.
30 Report of Pacific Railway Commission, Vol. I : 192.
31 See, for example, Annual Report for 1889 of Acting Commissioner W. M. Stone of the U.S. General Land Office, pp. 55, 56, etc.
32 Unauthorized Fencing of Public Lands, U.S. Senate Documents, First Session, Forty-eighth Congress, 1883-1884, Doc. No. 127 : 2.
33 Annual Land Office Report, 1888, p. 49.
34 See, Union Pacific vs. Redman, III Wyoming Reports : 679 ; the same vs. Link, Ibid., 680 ; the same vs. Gilland, IV Ibid., 396 ; the same vs. Schenk, V Ibid., 431 ; the same vs. Gilland, VI Ibid., 187, etc.
35 See, Powder River Cattle Company vs. Board of County Commissioners, III Wyoming Reports, 597 ; Searight Cattle Company vs. same, Ibid., 778 ; Frontier Land and Cattle Company vs. Baldwin, Ibid., 765. These were cases in which taxes were contested. For other cases enumerated see IV Ibid., 168 and V Ibid., 52. Lacey and Van Devanter also represented the Union Mercantile Company (III Ibid., 418) and the Traders Insurance Company (IV Ibid., 423).
36 Thurston with John F. Dillon regularly appeared for the Union Pacific Railroad. See 161 United States Reports, 456; Ibid., 95; 163 Ibid., 487; Ibid., 611; Ibid., 692; Ibid., 709, etc.
37 Union Pacific Rway Co. vs. Artist, 60 Federal Reports, 365-370. The italics are mine.G.M.
38 Warren was the head of the Warren Land and Live Stock Company of Wyoming. He became the chairman of the Senate Military Affairs Committee. There was a small public forest reserve called Crow Creek in Wyoming which was a military forest reserve and which the War Department wanted for military maneuvers. This reservation, however, had been leased to various small sheep raisers with the privilege of grazing. The reservation was leased to Warrens company, and in 1910 the small cattle men were ejected.
39 Statement in a laudatory biography of Van Devanter, the Saturday Evening Post, issue of March 18, 1911. Mr. Van Devanter, said this account, looks like a Western man and acts like one. He is active, virile, alertalthough not quick of speech. He is good looking, good-humored and most companionable. He is all earnest student and a prodigious worker. Although he is essentially a jurist, he keeps closely in touch with every phase of life and is much more human than the usual lawyer in whom the judicial temperament predominates. He is an outdoor man, who fishes, hunts, rides, plays golf and has fun.
40 See, 75 Federal Reporter : 200. (May 12, 1896.) The Central Trust Company also had extensive holdings in other railroads. According to a list of principal railroad stockholders made public by the Interstate Commerce Commission, in December, 1909, the Central Trust Company of New York was trustee for the Louisville and Nashville Railway Company of $5,501,000 of common stock of the Nashville, Chattanooga and St. Louis Railroad. The same report showed that the Central Trust Company of New York held $14,418,900 of common stock of the Chicago and Alton Railroad ; was trustee for $19,995,000 of common stock of the Philadelphia and Reading Railroad ; and held $70,212,500 of common stock of the Chicago, Rock Island and Pacific Railroad, and $380,000 of common stock of the Toledo, St. Louis and Western Railroad.
41 See an account of this case by Henry Wollman in the New York Times Annual Financial Review, for 1911, p. II.
42 The Truth About The Trusts : 434-435. In the year 1904 the total capitalization of all lines embraced in the Morgan group was more than two and a half billion dollars. Since then Morgan has extended his control.
43 Intercorporate Relationship of Railways, pp. 40-41.
44 Atlantic Coast Line Rd vs. Riverside Mills, 219 United States Reports : 186.
45 In announcing Lamars appointment to the Supreme Court of the United States, a special Washington news dispatch in the Atlanta Journal, December 13, 1910, stated : Practically all of the opinions written by Lamar as a member of the Georgia Supreme Court were examined by the President and the Attorney-General, and they were impressed favorably.
46 City of Chicago, Plaintiff in Error vs. Frank Sturges.
47 The utterances of some of the magnates were significant.
J. Pierpont Morgan : I consider the decision concerning Standard Oil entirely satisfactory ; moreover, I expected it. . . .
Jacob H. Schiff : I believe that the general effect of the Supreme Court decision will be most favorable to the corporations of the country. . . .
George J. Gould : . . . I am for the Supreme Court every time. For more than a hundred years it has been at work, and it has never made a mistake. . .
Frank J. Gould : . . Its great !
Henry Clews : . . . It may be taken for granted, therefore, that hereafter there will be nothing but good trusts in the eyes of the law.