Pacific States Telephone & Telegraph Company v. Oregon

In the early twentieth century, political and social reform was sweeping across America. The reformers, called Progressives, tried to ease the plight of immigrants and the poor, improve conditions in the workplace, and reduce the influence of large corporations on state and local politics. Progressive tools for political reform stressed direct democracy--giving more political powers to the voters--and included the initiative and the referendum. With the initiative, voters of a state could introduce new laws, bypassing the legislature. A referendum allowed citizens to accept or reject laws passed by the government. The use of the initiative and the referendum was popular in the Great Plains and Far West, and in 1902, Oregon amended its constitution to include these reform measures.

The reforms, however, were not popular with some companies, which were often the target of laws passed through initiative and referendum. In Oregon, the Pacific States Telephone and Telegraph Company disliked a law that levied a two percent tax on the profits of telegraph and telephone companies doing business in the state. Oregon voters had initiated the law in 1906; it went into effect the following year. Pacific States refused to pay the tax, and Oregon sued for its money. In court, the company cited Article IV, Section 4 of the Constitution for its defense. By introducing the initiative and referendum, Pacific States claimed, Oregon ceased to have a republican government, which relies on elected representative to make laws. Oregon's courts upheld the state's tax, and Pacific States took its claim to the U.S. Supreme Court.

In a unanimous decision, the Court dismissed Pacific States' case. In his decision, Chief Justice White referred heavily to the Court's decision in Luther. Deciding if a state government was republican was strictly a political issue that only Congress could determine. Pacific States would have had a better chance, White said, if it had attacked the tax itself on constitutional grounds. But the suit had an "essentially political nature . . . [that] . . . is at once made manifest by the understanding that the assault which the contention here advanced makes is not on the tax as a tax, but on the state as a state. It is addressed to the framework and political character of the government by which the statute levying the tax was passed."

White noted the irony of using the Guarantee Clause as grounds for the case. By asking the Court to hear such a blatantly political question, the appellant was trying to blur the separation of judicial and legislative powers spelled out in the Constitution. Pacific States' case "rests upon the assumption that the states are to be guaranteed a government republican by destroying the very existence of a government republican in form in the nation."