How a Chicago Grain Warehouse Made Constitutional law

Painting, "The First Grain Elevator
 in Chicago, 1838" by Lawrence C. Earle 

By Joe Mathewson

From the earliest interpretations of the U.S. Constitution by legendary Chief Justice John Marshall, an important and continuing legal dispute has been between state and federal regulation of business. Article I empowers Congress “to regulate commerce with foreign nations and among the several States,” a definition stretched over the years to cover businesses with only a modest connection to interstate commerce, but the states have a legitimate role, too, notably in protecting public health and safety. Where to draw the line? 

For instance, Congress and the Supreme Court have interpreted “interstate commerce” to validate such widely disparate federal legislation as farm planting limits in the Depression and the public accommodations non-discrimination requirements of the Civil Rights Act of 1964. At the same time the Court has upheld state business laws, for instance, in the formative years of the nineteenth century, a New York insolvency statute, Philadelphia’s regulation of ship pilots, and New England states’ restrictions on alcoholic beverages imported from other states.

Two other notable Supreme Court nineteenth-century business cases concerned huge Chicago grain warehouses, called elevators because they moved grain up and down. One dispute concerned a state license requirement and price-fixing regulations for grain warehouses. The Supreme Court’s influential ruling in this dispute would be cited in future cases stretching over a century. The other Chicago case was a rare curiosity at the Supreme Court: at issue was the puncture of a warehouse on the Chicago River, and the resulting loss of grain valued at $394.38 into the water, by the errant boom of a schooner being towed, inexpertly, by a tug boat.

Loading the great whaleback ship at the famous grain elevators, Chicago, U.S.A. (1895)
NYPL Digital Gallery ID G90F176_011F

In the first case the warehouse owners, who had been fined $100 for their refusal to obtain the state license and for charging more than the prescribed rates, retained one of Chicago’s leading lawyers, William C. Goudy.

Goudy was prominent and respected in civic affairs and politics as well as in the law. He was a contemporary of Melville Fuller, who later became chief justice of the U.S. Supreme Court (1888-1910). Goudy sometimes collaborated with Fuller, sometimes opposed him.

Notably, Goudy was a very early advocate of freedom of the press, more than a half century before that First Amendment guarantee was actually enforced by the Supreme Court. He defended the editor of the Chicago Times against both libel and criminal contempt of court charges. A leader of the Democratic Party, Goudy served as the Democratic national committeeman from Illinois and was a finalist in the legislature’s election of a United States senator in 1877, the same year that the warehouse dispute, called Munn v. Illinois, [one of The Granger Cases] was decided by the Supreme Court.

Goudy argued that, under the Constitution, only Congress could regulate interstate commerce, which was clearly involved here because, as the Court acknowledged, Chicago was “the greatest grain market in the world,” shipping Midwest produce from fourteen warehouses to many eastern states and even directly to Europe. He also contended that, because the owners had built their warehouse and operated it before the Illinois licensing and price-control law was enacted, it violated the Fourteenth Amendment’s standard that a state may not deprive a person of his property without due process of law.

However, while admitting that it found no precedent “for a statute precisely like this,” the Court ruled against Goudy. Chief Justice Morrison R. Waite, noting “the vast importance of the questions involved,” declared that neither the commerce clause nor the Fourteenth Amendment prohibited such state regulation of private property functioning as a public business, and therefore “the statute in question is not repugnant to the Constitution of the United States.” Two justices dissented forcefully, terming the statute “an invasion of private rights.”

It followed, then, that the case of the schooner’s damage to another Chicago grain warehouse produced a similar result: the operator of the tugboat was not shielded by the commerce clause from liability under Illinois law. In its opinion, rendered in 1886, the Supreme Court cited Munn v. Illinois as a precedent. So did dozens of subsequent Supreme Court interpretations of the commerce clause, most recently in 1987. A long tail, indeed.

Mercifully, the Chicago Tribune, in reporting the Munn decision, neglected to mention that the losing lawyer was none other than the highly-esteemed William C. Goudy.

Joe Mathewson, a former Supreme Court reporter for The Wall Street Journal, teaches journalism at Northwestern University’s Medill School and is the author of The Supreme Court and the Press: The Indispensable Conflict (www.supremecourtandthepress.com), published by the Northwestern University Press in its Visions of the American Press series edited by David Abrahamson.

Recommended reading:

"The Society of the Spectacle: How Things Are Remembered" (American Colossus: The Grain Elevator)

"1877: The Great Strike" (Illinois During the Gilded Age)