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Chief Justice Ryan Tames
"An empire within an empire"

Written by Joseph A. Ranney, Attorney at Law
Phone: (608) 283-5612

As railroads spread throughout Wisconsin in the 1860s, so did their power. Shipping costs were so high that many Wisconsin farmers and merchants had trouble making a living, and they bitterly resented the attitude of many railway officials. In 1872, Governor Cadwallader Washburn complained that "the opinion among railway managers seems generally to prevail, that their will is the supreme law." Washburn recommended that Wisconsin pass a law to control freight rates and other railroad abuses, as many other states were doing.

In 1873 a reform coalition elected William Taylor governor and won control of the Legislature. It quickly enacted a law, named after state senator Robert Potter of Waupaca, which represented the first effort ever to regulate Wisconsin railroads. The Potter Law created a railroad commission which had the power to strike down freight rates which were too high.

Wisconsin's two largest railroads, the Chicago & North Western and the Chicago, Milwaukee & St. Paul, quickly challenged the law. They argued that the Potter Law took away their constitutionally guaranteed right to charge rates of their choice. They also argued that when the state gave them corporate charters in the 1850s it had said nothing about limiting rates, and that by limiting rates now the state would be breaking its contract with them.

Courts in neighboring Illinois and other states had accepted these arguments and struck down railroad laws. All eyes turned to the Wisconsin Supreme Court and its newly-appointed chief justice, Edward Ryan, to see whether they would do the same.

In early 1874, to the delight of the reformers, Ryan and his colleagues issued a ringing defense of the state's right to regulate railroads and upheld the Potter Law. Their decision may be the most important one the Supreme Court has ever issued. Ryan rejected the idea that the railroad's charters were ordinary contracts. He pointed out that when Wisconsin became a state, the Constitution was worded to avoid this very problem: the Legislature was given the power to change corporate charters at any time.

Ryan approved Wisconsin's rule as good policy. To follow the example of other states, he said, would:

...(D)eprive Wisconsin of a large measure of its sovereign prerogative, and establish great corporations as independent powers within the state, a sort of imperia in imperiis [empire within an empire], baffling state order, state economy, state policy.

Ryan also rejected the railroads' argument that they had a right to charge any rates they liked. He blasted the railroads for arguing that rate regulations was "communism." Said Ryan:

"These wild terms are as applicable to a statute limiting the rates of toll on railroads, as the term murder is to the surgeon's wholesome use of the knife, to save life, not to take it. Such objections do not rise to the dignity of argument."

The reformers' victory was short lived. The railroads soon elected a more sympathetic Legislature which repealed the Potter Law and stripped the railroad commission of many of its powers. But Ryan's decision was not in vain. After 1875 the U.S. Supreme Court more and more often struck down reform laws based on arguments like those the railroads had proposed to Ryan, and the high court's example encouraged many state courts to do the same. But thanks to Ryan, that did not happen in Wisconsin. Even opponents of reform admitted that Ryan had established once and for all the state's right to regulate corporations for the public good, and they never tried to overturn that decision.

Note: The views expressed in this article are the author's alone. Distributed as a public service by the Wisconsin Supreme Court in honor of the state's sesquicentennial.

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