All cases before the U.S. Supreme Court are important. Some more so than others. The State of Georgia’s landmark lawsuit against the railroads was among the most important, for it was laden with consequences — social, political and economic.
In its Complaint filed June 12, 1944, Georgia alleged the railroads colluded to fix and to impose discriminatory freight rates. It also alleged the illegal practices were impeding the State’s growth and industrial development.
On March 26, 1945, the Court found in Georgia’s favor. The decision echoed loudly across the federal bureaucracy and in the halls of Congress. And, as we shall see, reliable authorities say the litigation benefitted industry and commerce and helped pave the way for modern Georgia.
Contrast today’s Georgia with that of the 1940s. It was largely rural, poor and undeveloped. The economy was heavily dependent on agriculture and its allied industries. At turn of the decade, per capita income was 57 percent of the national average.
Abject poverty was pervasive. Homeowners resided in but 30 percent of all housing. Thirty-five percent were equipped with indoor plumbing. Only half of Georgia’s housing was electrified.
As far back as Reconstruction, businessmen, manufacturers and shippers blamed the railroads for the region’s backwardness. Then and in the coming decades the rail lines had authority to fix their respective freight rates. Political leaders claimed the rates were discriminatory: for hauling cargo into, across and out of the region. Furthermore, they averred, the rates were obstructing the South’s social and economic progress.
For the purpose of setting freight rates, the rail lines established “territories.” The Southern Territory encompassed most states of the old Confederacy. The Official Territory included northern states east of the Mississippi. A report to the 75th Congress (1937-39) revealed that shippers of manufactured goods, on average, paid 39 percent more in the Southern Territory than in the Official Territory.
By the 1930s, a crusade was underway against the railroads. Georgia Governor E.D. Rivers, elected in 1936, became a prominent spokesman, along with other governor-members of the Southern Governors Conference.
In 1937, the Southern Governors Conference filed an administrative complaint with the Interstate Commerce Commission (ICC). The Governors asserted that existing freight rates were in violation of law. However, the ICC stalled. It failed to launch hearings until June, 1941 that dragged on for three years.
In 1942, Georgia elected one of its most progressive and effective Governors, Ellis Gibbs Arnall of Newnan, then serving as the state’s Attorney General. Arnall had emerged as a prominent speaker in the freight rate controversy. He, too, became convinced legal action was mandatory.
Georgia filed its Complaint in the U.S. Supreme Court May 27, 1944. Named as defendants were Pennsylvania Railroad and 19 other rail lines. The Court heard the case on January 2, 1945, where Arnall was the only sitting governor to argue a case in the U.S. Supreme Court.
The Court found for Georgia and ordered a trial on the merits. Justice Douglas wrote:
Discriminatory rates are but one form of trade barriers. They may cause a blight no less serious than the spread of noxious gas over the land or the deposit of sewage in the streams. They may affect the prosperity and welfare of a state as profoundly as any diversion of waters from the rivers. They may stifle, impede, or cripple old industries and prevent the establishment of new ones.
No trial of the case was ever held, nor would it matter. The ICC sprang to life and issued a 300-page ruling virtually adopting every plank of the Southern platform. Governor Arnall declared: “The South is well on its way to readmission to the Union.”
The extent of the lawsuit’s benefits, of course, is debatable. Those in the majority, however, cite hard evidence following the lawsuit’s outcome. They point to paved highways that began replacing rutted roads where mule-drawn wagons were still plodding along as late as the 1940s. Soon the new roads were speeding goods and travelers. Where vast cotton fields once dominated the landscape appeared factories, warehouses and freight terminals. In growing towns and cities, office parks sprang up, as did restaurants full of patrons. Skyscrapers rose along the Peachtree corridor.
Governor Arnall, himself, was a significant beneficiary. Upon leaving office he co-founded the highly-profitable Atlanta law firm of Arnall, Golden & Gregory. Thereafter, he became co-founder and President of Dixie Life Insurance Company.
•Retired attorney Jim Thomas lives in Atlanta. Email jmtlawyerspeak@yahoo. com
