SANTA CLARA COUNTY V. SOUTHERN PACIFIC RAILROAD

In January 1886 a California circuit court heard the case of Santa Clara County v. Southern Pacific Railroad Company. The county government, the seat of which is San Jose, brought a complaint against the rail company over the issue of Southern Pacific's nonpayment of state taxes. The state had attempted to collect taxes for fences (which it assessed as "improvements") that Southern Pacific erected between the roadway and adjacent lands. The railroad company argued that California did not have the authority to assess taxes on the roadway or the fences because it had no jurisdiction to these lands or the improvements made to them. Southern Pacific's lawyers maintained that the corporation had been granted the lands through a federal act that was approved by the state of California. The declared object of the act was for "the construction of a railroad and telegraph line from the Missouri river to the Pacific, which, for all purposes of communication, travel, and transportation, so far as the public and the general government are concerned, should be operated 'as one connected, continuous line."' Therefore, the assessment was judged void.

The favorable ruling that Southern Pacific received in this case stirred public outrage. Not only did the railroad control most of California's transportation, it exerted a powerful political influence. Among Southern Pacific's most vocal opponents was William Randolph Hearst (1863–1951), who, as publisher of the San Francisco Examiner newspaper, launched an attack on the monopolistic practices of the rail company. In 1901 the Southern Pacific became a bigger power when financier Edward Harriman (1848–1909) acquired it along with Central Pacific Railroad; Harriman thus dominated rail traffic in the West. Harriman's monopoly became the object of an investigation by the Interstate Commerce Commission (ICC) in 1906–1907.

Southern Pacific's undoing came partly at the hands of politician Hiram Johnson (1866–1945), the Progressive Republican candidate for California governor in 1910, who toured the state with his promise to "kick the Southern Pacific Railroad out of politics." Winning the election, Johnson and his fellow reformers gained control of both houses of the state legislature in 1911 and then they passed legislation to regulate the railroads and other public utilities. In 1913 the U.S. attorney general prosecuted Southern Pacific and Union railroads, claiming their merger violated the Sherman Anti-Trust Act of 1890.

See also: Railroad Industry, Robber Barons