Charlestown, Massachusetts, sits on a peninsula north of the Charles River, across from Boston. It was founded in 1629. A year later, Harvard College began operating a ferry between Charlestown and Boston. By the late 1780s, people who lived north of Boston complained that the ferry service was too slow and too expensive.
In 1785, the Massachusetts legislature incorporated the Charles River Bridge Company to build a toll bridge between Charlestown and Boston. Before the 19th Century, it was commonplace for state legislatures to create business corporations and give them charters to build public improvements such as bridges and roads. In this respect, corporations were arms of the state, because their existence, powers, and profits came from special legislative acts.
The charter to the Charles River Bridge Company initially was for 40 years. In 1792, the legislature extended the life of the charter, but it also declared that the Charles River Bridge would become the property of Massachusetts in 1856. The state would then operate it as a free bridge. Until that time, the company could collect tolls. The company did a thriving business, collecting more and more tolls as traffic between Boston and Charlestown increased.
In 1828, the Massachusetts legislature responded to increasing urban congestion in the Boston area by incorporating the Warren Bridge Company to build a second bridge connecting Boston and Charlestown. The new bridge was to be virtually parallel to the Charles River Bridge. The charter to the Warren Bridge Company provided that its bridge would operate as a toll bridge until 1834. Then it would become the property of the state, which would operate it as a free bridge.
The Charles River Bridge Company sought an injunction from the Supreme Judicial Court of Suffolk, Massachusetts, to prevent construction of the Warren Bridge. It contended that the charter to the Charles River Bridge Company was a contract that vested the company with property rights until 1856. Article I, section 10, of the Constitution, prevents states from impairing the obligations of contracts. The charter to the Warren Bridge Company, it argued, impaired the contract with the Charles River Bridge Company.
The Warren Bridge was built and being used by the time the Suffolk County Court ruled on the dispute. The Charles River Bridge Company therefore amended its complaint, seeking reimbursement for tolls that had been diverted to the Warren Bridge. It also sought an injunction against the Warren Bridge ever being operated as a free bridge.
The Massachusetts Supreme Court ruled against the Charles River Bridge Company on all its claims. The Charles River Bridge Company sought Supreme Court review. The case had to be argued twice, because illnesses and vacancies on the court made it impossible to muster a majority until 1837. By then, the Warren River Bridge had become the property of the state and was being operated as a free bridge. The Charles River Bridge had closed, and the Supreme Court was dominated by appointees sympathetic to the rights of states to regulate private property.
Chief Justice Taney’s opinion affirmed the power of the state to charter the Warren Bridge. He construed the contractual rights of the Charles River Bridge Company narrowly: nothing in its charter guaranteed it that it would never have competition. He then offered an expansive view of the power of the state legislature to promote economic development:
[T]he object and end of all government is to promote the happiness and prosperity of the community by which it is established; and it can never be assumed, that the government intended to diminish its power of accomplishing the end for which it was created. And in a country like ours, free, active and enterprising, continually advancing in numbers and wealth, new channels of communication are daily found necessary, both for travel and trade, and are essential to the comfort, convenience and prosperity of the people. . . While the rights of private property are sacredly guarded, we must not forget, that the community also have [sic] rights, and that the happiness and well-being of every citizen depends on their faithful preservation.
Taney’s opinion was a victory for Jacksonian democracy and a different interpretation of the Contracts Clause than had been offered by Federalist judges. It also was a victory for the regulatory authority of state legislatures.
In 1837, a Judiciary Act enlarged the number of judicial circuits from seven to nine to provide federal circuit courts in the nine new Mississippi Valley states. The policy of having one Supreme Court justice serve on each of the federal circuit courts justified a corresponding increase in the size of the Supreme Court from seven to nine. President Jackson’s successor, Martin VanBuren, appointed two advocates of states’ rights, Tennessee’s John Catron and Kentucky’s John McKinley. McKinley served only until 1852; he was replaced by another advocate of states’ rights, Alabama’s John Campbell. These justices helped to form a new majority on the Supreme Court that viewed both the states and the national government as having broad regulatory powers. Instead of the national government dominating the states, however, their approach to constitutional interpretation recognized the national and state governments as having concurrent authority to regulate commerce and other matters. This view of the Constitution would have a a significant impact on on commercial regulation. Three notable examples of cases validating state regulatory powers during this period are:
In each instance, the Taney court took a different approach to interpreting the Constitution than would have been anticipated from the earlier days of the Marshall court. But the court’s authority to interpret the Constitution and to speak with an authoritative institutional voice was no longer in question.