the tax, it can renounce its local business. If the state has an absolute and arbitrary power to exclude a corporation, a bad reason cannot nullify that power. He asks what the court would do if the State of Kansas, the following year, were to simply prohibit the company's doing business in the state till it had paid $20,100 (the amount in dispute) without giving any reason.

Mr. Justice White, who concurred in the Telegraph case on the ground that the tax and the expulsion deprived the corporation of property without due process in violation of the Fourteenth Amendment, answered this challenge in his concurring opinion in the Pullman case, in which the decision of the court was announced at the same time. He drew a distinction between an absolute power to exclude, and a relative power. The absolute power, a power to exclude as to all business and for any reason, exists as to purely intrastate businesses. As to corporations engaged in part in interstate commerce, the power is only relative, that is, it can be exerted only as to the intrastate business, and for a good reason. Hence, in the latter case, a decree of ouster either for a bad reason or for no reason at all, would be an unwarranted assumption of power. The argument seems fallacious. "Absolute " power is used in two senses: It is a power to exclude as to all business; and it is also a power to exclude for any reason. As to corporations conducting only local business, the power exists in the first sense, and also in the second. As to interstate corporations, since it does not exist in the first sense, therefore, the argument is, it cannot in the second. Or, to restate the matter more nearly in Mr. Justice White's language, to exclude a corporation for no reason, or for a bad reason, is a claim of absolute power. But an absolute power is a power to exclude as to all business, interstate and intrastate alike. That claim is invalid. Therefore the state is justifying an illegal result by an unconstitutional

claim of absolute power and two wrongs cannot make a right. The query seems warranted how the mere application of the same name to two different claims of power can make those two claims so identical that a state cannot assert one without asserting the other!

It will be observed that these cases really involved two separable questions, the validity of the tax, and the validity of the expulsion. Of the five Justices who made up the majority, only Mr. Justice White was willing to go so far as to say that a state could on no account deprive an interstate corporation of the sort there involved of the right to do local business; and he did not rely on this argument. To have so held would have placed the decision on logically unassailable ground; and it would not, it is submitted, have involved a very radical departure from existing principles. As legal concepts, interstate and intrastate commerce may be distinct and separable. Dialectically, the "right" to engage in interstate commerce need not include the "right" to carry on local business. But if, as a matter of business experience, an interstate railroad cannot be properly conducted without deriving some revenue from local business, to cut off that revenue does in fact interfere with economical railroading. It is not the bare power to carry on interstate commerce that the Constitution guarantees. It is the power to carry it on in a normal, business-like way. It is, for example, entirely possible for a group of citizens to carry on commerce between the states without incorporating; but incorporation is nevertheless, in the language of the court," a convenience in carrying on their business" of which the state cannot deprive them.1 The local business of an interstate corporation is, of course, subject to state regulation to a greater degree than the interstate business. It is subject to a reasonable local business tax, or to the local antitrust laws. These

1 Crutcher v. Kentucky, 141 U. S. 47 (1891).

are regulations reasonably adapted to subserving local interests. But it is to be doubted whether the power of expulsion is necessary to carry out these legitimate purposes. Mandamus, injunction, and indictment are always available, and would generally be adequate.

If this view is not taken, and there is at least a dictum in a later case against it,1 the Telegraph and Pullman cases cannot, it seems to me, be sustained on any ground which is not equally applicable to corporations not engaged in interstate commerce. To say that these corporations cannot be expelled, as to their local business, for a bad reason, is to beg the whole question, for if the power of expulsion exists, the power exists to exact any pecuniary compensation as a condition of admission, and the refusal of the corporation to pay that compensation is not a bad reason. It can be termed a bad reason, only if the interstate business is by virtue of the Commerce Clause deemed entitled to a reasonable contribution on the part of the local business, toward the payment of the fixed charges; or, on the other hand, if the local business is entitled on its own account, to constitutional protection against arbitrary exactions.

1 See St. Louis Southwestern Railway Company v. Arkansas, 235 U. S. 350 (1914).

CHAPTER VIII

THE DOCTRINE OF UNCONSTITUTIONAL CONDITIONS

If all business could be divided into interstate and foreign commerce, on the one hand, and business of purely local significance on the other, the constitutional status of foreign corporations in the United States would present a relatively simple problem. Activities which fell within the first category would be protected against discriminatory legislation by the Commerce Clause. As to the second category, the doctrine of Paul v. Virginia, giving the state free reign in its treatment of foreign corporations, would not have led to unjust results. If the business is purely local, if it bears no economic relation to business in other states, there is no hardship in saying that if it is to be conducted in corporate form at all, it should be by domestic corporations. It is the existence of a third category which has made the problem acute; a category comprising a large amount of business of national scope and significance which is not protected by the Commerce Clause. There is in the first place interstate business which is not commerce at all. Insurance, necessarily conducted on a national scale, is a notable example. Since Paul v. Virginia, the Supreme Court has steadfastly adhered to the position that this is not commerce, despite repeated attempts to secure a reversal.1 Again there is much business which, while organized on a national scale, by corporations carrying on activities in a number of states, nevertheless does not comprise the shipping of commodities across state

1 New York Life Insurance Company v. Deer Lodge County, 231 U. S. 495 (1913), was the latest, and probably the most formidable, attempt to persuade the court to extend the protection of the Commerce Clause to insurance. The previous cases are reviewed in detail.

boundaries. Retail chain stores, now an increasingly important economic phenomenon; construction companies, which send men and equipment into other states to erect buildings or bridges; manufacturing companies, which maintain local agencies in various states to repair the products which they have sold; these are common examples.

As to foreign corporations engaged in these and similar types of business, as we have seen, the Supreme Court was in 1906 still emphatically committed to the doctrine that the state could arbitrarily exclude or expel the corporation at will, or admit it subject to whatever conditions it saw fit to impose. As the number and importance of these corporations increased, increasingly large property values, tangible and intangible, were by reason of this doctrine exposed to discriminatory state legislation, and subject to arbitrary impairment or even destruction. Increasingly urgent attempts were made to induce the Supreme Court to recede from its position, and give these property values constitutional protection.

How strongly the injustice of taxes which discriminate against foreign corporations appealed to the Supreme Court may be seen from a case decided in 1907. The Colorado foreign corporation law admitted foreign corporations on the condition that they be subjected "to all the liabilities, restrictions and duties which are or may be imposed upon corporations of like character organized under the laws of this state, and shall have no other or greater powers." Domestic corporations had at this time a limited life of twenty years. With this law in force, a New Jersey corporation engaged in business in the state, and invested money there. The law was then amended, by requiring of all domestic corporations a fee of two cents per $1000 capital stock, and of all foreign corporations, a fee of four cents per $1000. This tax the court held invalid, as impairing the obligations of a contract,