Even as Louis Brandeis worked to get the savings bank insurance bill through the last obstacles in the General Court, Asa Palmer French, the U.S. attorney for Massachusetts, approached him for advice on whether the proposed merger between the New York, New Haven & Hartford Railroad and the Boston & Maine line would violate the 1890 Sherman Antitrust Act. Preoccupied with insurance, Brandeis asked his partner William Dunbar to look into it. Brandeis, despite the almost casual tone in the letter to Dunbar, already knew about the proposed merger. For the next six years he would be heavily involved in fighting the New Haven and the financial power behind it, J. P. Morgan & Company, in their effort to monopolize New England’s transportation. The controversy would transform Brandeis from an important but little-known Massachusetts reformer into a national figure.
Unlike insurance reform, with its relatively straightforward moral structure, the New Haven debate pitted former allies in other reforms against each other, and while Brandeis believed the issues to be relatively clear-cut, others recognized that complex economic forces made the question anything but simple. In this fight, as in his growing opposition to monopoly and bigness, moral imperatives outweighed economic considerations, leading him to ignore important features of the debate. Moreover, where he had merely irritated some of Boston’s business and financial leaders in his fight against the Elevated, in the drawn-out struggle over the New Haven he made outright enemies of many of the city’s prominent citizens.
IN 1911, BRANDEIS WROTE to Norman Hapgood predicting that the New Haven Railroad, long one of the most reliable investments in the country, would soon reduce its dividend, and there would be a good story in “The Decline of New Haven and Fall of Mellen,” referring to the road’s president, Charles Sanger Mellen. It would be “a dramatic story of human interest with a moral—or two—including the evils of private monopoly.” At the end, he suggested an epitaph or obituary notice. “Mellen was a masterful man, resourceful, courageous, broad of view. He fired the imagination of New England; but, being oblique of vision, merely distorted its judgment and silenced its conscience. For a while he trampled with impunity on laws human and divine; but as he was obsessed with the delusion that two and two make five, he fell at last the victim to the relentless rules of humble arithmetic. Remember, O Stranger: ‘Arithmetic is the first of sciences and the mother of safety.’”
Mellen had indeed been arrogant and had acted, if not illegally, certainly at the margins of the law. He had been handpicked by J. P. Morgan to head the New York, New Haven & Hartford Railroad Company in 1903. Before then, he had been president of the Northern Pacific Railroad, another Morgan enterprise, and in that position had won the respect of many business leaders and public officials around the country. President Theodore Roosevelt consulted with him and termed him a “first class fellow.” Although in the end the effort to consolidate New England’s rail system collapsed in ignominy, at the height of the battle Mellen seemed invincible and enjoyed the support of many of Boston’s leading businessmen.
For Brandeis, at all times, the fight involved moral issues, and as his thoughts on monopoly and the role of investment banking houses began to jell, he started writing on the evils of bigness and financiers who used other people’s money to underwrite monopolistic schemes. At no point in the fight did he concede that there might be good reasons for New England transportation to be brought under single control, but even if there were, one still had to follow the rules. Years later he told his niece Fannie, “Lying and sneaking are always bad, no matter what the ends. I don’t care about punishing crime, but I am implacable in maintaining standards.”
Interestingly, for a man who prided himself on facts, Brandeis here seemed oblivious to the economic realities that led many people to support consolidation. Railroads at the time constituted the industrial arteries of the nation. Grain grown in the Midwest traveled over rail lines to ports on the East Coast for shipment overseas. Factories, wherever located, depended on railroads to bring in raw materials and then carry finished goods to markets in other parts of the country. Railroads played such an important role in the nation’s economic health that following the Civil War, federal, state, and local governments had all done their best to encourage construction through tax exemptions and subsidies. In 1860 there had been 30,000 miles of track in the country; by 1916, 254,000, more than the rest of the world combined. Much of this growth had been haphazard, and as the economy matured, it no longer made sense to have multiple lines running parallel tracks to small markets. Consolidation would take place, but how, and under whose direction?
Massachusetts was one of the nation’s leaders in railroading, and Boston had long enjoyed an advantage over other eastern ports because of the efficiency by which rail lines brought inland production and raw materials to the coast for shipment elsewhere and in return took imported goods to the hinterlands. Economic developments following the Civil War, however, including the construction of major trunk lines to New York and Philadelphia, undermined Massachusetts businessmen’s bargaining power with the major railroad systems. In addition, the area’s aging rail lines ran at high cost and needed extensive—and expensive—improvements, while the gridlike pattern in which the roads had grown required significant maintenance costs for terminals and junctions. The rise of electrified interurban street railways needed to take people to work also deprived the older lines of what had once been a profitable commuter traffic.
To many businessmen and civic leaders, consolidation made sense, since redundant facilities could be closed and a more efficient system would help the region compete against New York and Philadelphia. Instead of viewing the mergers negatively, they saw them as in the public interest. Railroading constituted the single biggest business in the state, employing over twenty thousand persons and carrying forty million passengers and twelve million tons of freight each year, and many people believed that New England in general and Massachusetts in particular could not enjoy economic prosperity without a healthy rail system. To achieve that goal, consolidation seemed essential. Moreover, combination was hardly a stranger in Massachusetts. In 1875 some sixty-two railroad companies operated in the state, and as late as 1890 there had been eight independent steam railroad lines in Massachusetts. By 1900 only two remained, the New Haven and the Boston & Maine, while the Boston & Albany tracks had been leased to the New York Central. The Massachusetts Board of Railroad Commissioners did not oppose this trend and in fact adopted policies to encourage consolidation in the name of efficiency.
So when Charles Mellen took over the New Haven line in 1903, he found a solid group of influential businessmen in Massachusetts and other parts of New England quite sympathetic to his plans, and at least in the short term he seemed to have succeeded. Within six years of his arrival, Mellen oversaw the consolidation under the New Haven of all the important interurban street railways in southern New England, the region’s intercoastal steamship lines, and the Boston & Maine Railroad, which in turn owned a majority of the stock in both the Maine Central and the Boston & Albany. To accomplish this, he rode roughshod over legal obstacles as well as the growing sentiment against monopoly. He managed to get the governor of Massachusetts to push through a bill that in essence ratified illegal purchases, and he secured assurances from the president of the United States that the Justice Department would not pursue antitrust proceedings. “Paternalism must be exercised by those who have power,” he told a group of businessmen, “and I think we have the power.” This arrogance, as much as anything, led to his downfall and the disintegration of the empire he had built.
JUST AS MASSACHUSETTS had led the nation in building the earliest railroads, so it also pioneered in creating the first public commission to oversee rail operations in the state. In addition, over the years the legislature had passed laws restricting the sale and ownership of stock in railroads chartered in Massachusetts. In 1902, steam railroads had begun petitioning the legislature for permission to enter the electric railway business, through either purchase of existing lines or construction of new roads. Massachusetts law placed many restrictions on steam railroads, and just as it had favored railroad construction fifty years earlier, now it granted legislative favors to the interurban companies. But even with legislative aid, the electric systems did not fare well in the early twentieth century, and the Board of Railroad Commissioners urged that consolidation take place, not only among the electric lines, but with the steam roads as well. This seemed to be the way of the future, but because of competing interests in the assembly, the legislation proposed by the commission failed to advance. The growing sentiment against monopoly, fueled by the writings of Thomas Lawson and other muckrakers, also made proconsolidation legislation unpopular among many state officials.
Mellen decided to ignore the law, and in 1905, without consulting either the commission or the legislature, he began buying up interurban systems in the western part of the state through a holding company he organized in Connecticut, the Consolidated Railway Company. When called before a legislative committee the following year, Mellen admitted what he had done. “I don’t want to deceive anybody,” he told the committee. “I am president of the [New Haven] Railroad Company. I am president of the Consolidated Company. I am president of the boards of trustees. I am president of your street railway companies.” Technically, the law had not been violated, because the New Haven did not own the interurban lines, but everyone recognized the sham involved.
Charles Sanger Mellen, 1910
The Boston & Maine, the other large system in New England, fearing that it would be put at a competitive disadvantage, immediately asked for legislative permission to buy streetcar systems, a request favored by the Railroad Commission, which drafted the enabling legislation. Another bill made such mergers legal, but gave the Railroad Commission greater authority to regulate consolidation. Robert Luce, a Republican from Somerville, objected to consolidation, and his argument anticipated how Brandeis, with whom he would be closely allied in the merger fight, approached the matter. Luce noted that the law did not allow a railroad company to sell its stock to any other corporation—foreign or domestic—without explicit permission from the General Court. The solution to the Boston & Maine’s problem would be not to legalize the fraudulent purchases by the New Haven but to enforce the law and require the New Haven to divest itself of its purchases. Illegal and immoral behavior should not be rewarded, nor should it be permitted to continue. Caught between advocates of consolidation and reformers who insisted on upholding the law, the General Court passed no bill, leaving the electric rail systems Mellen had acquired under the effective control of the New Haven.
Interestingly, the public debate initially ignored the legal and moral issues Luce had raised, concentrating instead on the economic and political, and no one seemed able to reach a decision. The Board of Trade, after lengthy discussion, voted to postpone legislation until there could be further discussion. Joseph Eastman, secretary of the Public Franchise League, reported that after several debates, the members had been “unable to agree as yet whether … to favor a bill allowing such consolidations.” The members did seem to concur that if mergers were to be permitted, then the legislature should change the law. The following year league members still could not see eye to eye on whether the proposed mergers would be in the public interest, and recommended that any legislation be put off for still another year. Although Brandeis participated in these discussions and came to oppose the purchases, he could not win over his colleagues in the league.
In June 1906, Governor Curtis Guild sent a special message to the assembly, and in it he voiced traditional Massachusetts concerns about keeping control of the state’s destiny in the hands of its citizens. The New Haven, “controlled by men who are not citizens of Massachusetts,” had throttled competition in the western part of the state. “Slowly, surely, the control of our railroads, the control of the passage to market of every Massachusetts product, the control of transportation to and from his work of every Massachusetts citizen, is passing from our hands to those of aliens.” The legislature should act promptly to correct “this grave injustice” so that transportation within the state can “be controlled by the people of Massachusetts, and not by men beyond the reach of her law and the inspiration of her ideals.”
One can smile at what we now consider an antiquated attitude, but it still thrived in the Bay State in the early twentieth century, and it meant a great deal to men like Guild and Brandeis. Perhaps consolidation made sense economically, but if it did, it had to take place within a framework of laws created by the people of Massachusetts; and those laws should protect the interests of the state’s citizens and not those of private corporations, especially outside corporations.
As a central figure in the Public Franchise League, Brandeis took part in those debates and knew of the concerns raised at the meetings. But there is no mention of anything related to the New Haven in his correspondence until June 1907, when he told his brother, Alfred, “My merger position is being much attacked.” (He did, however, pay attention to the financial reports of companies such as the Boston & Albany line, probably as part of the general knowledge he considered useful in his commercial law practice.) Since Brandeis had not yet issued any public statement about the New Haven’s activities, one presumes that the attacks took place within the Public Franchise League discussions. By then, however, Mellen had made a great deal of progress. Despite a promise to the assembly to stop acquiring electric lines, Mellen had gone ahead in his plans. He set up another dummy corporation, the New England Investment and Security Company, and transferred to it the New Haven’s holdings in interurban railways. All the directors of this company also served as directors of the New Haven, and Mellen headed both. Although technically he had broken no rules, he had once again flouted the law.
Mellen had also begun negotiating to buy a controlling interest in the Boston & Maine Railroad, and the acquisition of the street railway systems suddenly became a minor issue. If Mellen succeeded, the New Haven would in effect control all rail traffic in New England and, along with the Morgan maritime trust, control the port traffic as well. Again Mellen denied purchasing the Boston & Maine, even as he concluded negotiations to transfer nearly 110,000 shares of its stock to the New England Navigation Company, a New Haven subsidiary. Mellen even contacted President Theodore Roosevelt in April to make sure that there would be no prosecution under the Sherman Act.
If the New Haven believed the legislature would just ignore the purchase, it did not count on the fact that by now Mellen had ruffled more than a few feathers. Merger may have been the face of the new economy, but many people liked the fact that rules governing moral behavior shaped the old economy; these included the Lawrence family, which had long held a large but not controlling interest in the Boston & Maine. General Samuel Lawrence owned between fifteen thousand and sixteen thousand shares, and his son served as one of the lawyers for the line. Knowing Brandeis’s views, they retained him to represent their interests and oppose the merger.
Brandeis instinctively opposed the merger for several reasons. Like Guild and others, he wanted control of Massachusetts businesses to stay in Massachusetts hands. The simple question, he wrote, is “whether the whole transportation system of Massachusetts shall be turned over to a single monopoly, and that one controlled by aliens—practically the Standard Oil and J. P. Morgan interests—parties who have great interests in other states and little in Massachusetts, and are foreign to our tradition.”
In addition, although he was rapidly becoming an opponent of monopoly, he did not necessarily oppose consolidation, as was obvious in the development of the sliding-scale gas arrangement; he did, however, oppose manipulation of stocks by the large banking houses that propelled the merger mania. The bankers, in his view, did no constructive work, took no risks, used other people’s money, and then grabbed up the fruits that rightfully belonged to creative and honorable entrepreneurs. One can get a sense of Brandeis’s thinking by looking at what he wrote about John Murray Forbes, the founder of the Burlington line. Forbes “was a builder; not a combiner, or banker, or wizard of finance. He was a simple, hard-working business man…. Bold, but never reckless; scrupulously careful of other people’s money, he was ready, after due weighing of the chances, to risk his own in enterprises promising success…. Under his wise management, and that of the men who he trained, the little Burlington became a great system.” A few years after Forbes’s death in 1898, the Burlington had been swallowed up by J. P. Morgan, and passed forever from its independent Boston owners.
One can dismiss Brandeis as old-fashioned, wedded to a world and an ethos that no longer existed, and blind to the realities of modern economic life, and in part that would be very true. There is a parochialism in his demand that Massachusetts railroads be owned by Massachusetts citizens. Forbes and others in the nineteenth century had built and owned many of the railroads in the western and southern parts of the country, and when these lines, like the Burlington, came under the control of Morgan or one of the other banking houses, Brandeis lamented that Bostonians no longer owned them. Yet the demand for honesty, for adherence by everyone to the same legal rules, the abhorrence of the trimmer, the faithfulness to a moral system—these qualities are not to be dismissed lightly. The very faults that Brandeis detailed in the “new economics” of the early twentieth century are akin to the practices that many modern industrial leaders claim are part of the “new economics” of the twenty-first century. They are no more admirable today than they were one hundred years ago.
Finally, Brandeis had been brought into the merger fight as a lawyer representing the Lawrences, but as in so many other battles he quickly came to the conclusion that the issues involved transcended the interests of any one party. He and the Lawrences eventually reached an agreement whereby he would not accept any fee, but they would pay for certain related expenses. Very quickly, however, Brandeis realized that he would have to devote a great deal of time to the fight, perhaps even more than he had to savings bank insurance. By now he had adopted a policy of not accepting a fee for matters that he considered in the public service, but in the merger fight he went further. His large income, simple lifestyle, and conservative investments had earned him his first million, and so he could afford to pass up lucrative legal matters when it seemed to him proper to serve the public. He recognized, however, that he generated much of the business that came to the firm; even if he did not do the actual work, clients came because of his reputation. He did not believe that his associates should suffer because of his reform proclivities, and in November 1907, six months after the Lawrences initially retained him, Brandeis dictated the following letter to E. Louise Malloch, who handled the firm’s finances:
Dear Miss Malloch:
When Mr. Lawrence came in to get me to act as counsel for him in the matter of the Boston & Maine merger, he intended to retain me in the ordinary manner, and has undoubtedly supposed that I would make charges to him as in any professional matter.
I feel, however, that being a matter of great public interest in which I am undertaking to influence the opinion of others, I do not want to accept any compensation for my services.
Under the peculiar circumstances of the retainer, I do not think that my partners and others interested in the profits of the firm ought to be affected by my own feeling in this matter, and I therefore wish to substitute myself as the client of the firm in this matter so far as the charges for my own services are concerned.
So far as relates to disbursements, and charges for accountants’ and stenographers’ service, I will have the firm make bills to Mr. Lawrence.
I therefore enclose my personal check to the firm for $5000. for services on account.
Before the merger fight ended, Brandeis “reimbursed” his firm for more than $25,000. Edward McClennen later insisted that “his partners never sought anything of the kind or suggested it.” Even had he not paid in a cent (as had been the case with the Boston Elevated, the sliding-scale, and the insurance campaigns), the firm had all of the business it could handle. Brandeis continued to practice, but gave over more and more of the work to his partners and associates and reimbursed them appropriately.
This quixotic gesture—that unlike his pro bono service, has not become a fixture of American law practice—harks back to what Louis had told Alice some fifteen years earlier, that he hoped to be successful so that he could be free. He had wanted, he told his friend and client Edward Filene, initially to give at least one hour a day to public service and then to give more later. By 1907, Brandeis had achieved his freedom, even if, because of his finely tuned morality, it meant paying for his own services so that others would not suffer even a minor loss.
Once again a reform had found him. Brandeis did not, like Cervantes’s famous don, go out seeking windmills to tilt at and wrongs to right. He still saw himself as primarily a lawyer, but one who drew sharp distinctions between the private aspects of a client’s complaint and those instances that involved larger public interests. Savings bank insurance seems to be the one instance in which he tackled an issue without invitation, as it were, although he came to understand the depth of the problem through his representation of the Policy-Holders’ Committee. Even after he had become a nationally known reformer, Brandeis did not go out searching for battles, and in every one of his famous fights—the New Haven, Pinchot-Ballinger, protective legislation—others drew him into their causes. Although often dubbed a crusader, Brandeis never had a reform agenda. He had ideals and he had strong views on certain evils such as bigness, but he never went looking for a fight. Fights seemed to find him.
IN WRITING TO HIS BROTHER on 26 June 1907, Louis noted, “The Savings Bank bill is now in the Governor’s hands. It looks as if we shall get some kind of anti-merger bill, but not as good a one as I should wish. The achievement of 80 cent gas gives me such satisfaction at this time when my merger position is being much attacked.” He hoped that Curtis Guild would endorse his bill, but Brandeis found that despite his best efforts and strenuous work by his allies in the assembly, in the New Haven affair he would have little influence on the legislature and no success in getting it to adopt an antimerger measure of which he could approve.
An incident at the beginning of the fight is illustrative of the problems Brandeis confronted. He prepared a sweeping proposal that would have made it a criminal offense for the New Haven to acquire any more stock in the Boston & Maine and that required it to dispose of all the stock it held before 1 April 1908. He wanted, as he told the editor Mark Sullivan, to make the act “so clear in its terms that it would not need the interpretation of the highest court in the state to tell what it means, so that even Mr. Mellen and his counsel might not be in doubt as to what it means.”
On 9 June 1907, he appeared before the legislative committee looking into the merger, and in answer to the argument that consolidation of rail services would lead to greater efficiency in operation, he put forth for the first time the idea that there is a limit to efficiency in consolidation, and that when an enterprise grows beyond that size, it becomes less rather than more efficient. There is little empirical evidence or economic theory to support this assertion, but Brandeis believed it to be true; he looked around and saw large companies that apparently operated inefficiently compared with smaller firms. He also attacked monopoly in general, and especially the idea that regulation would protect the public from monopolistic abuse. “I do not believe it is possible to create a power strong enough to ‘properly safeguard’ it.”
Two days later Mellen testified and conceded that interests allied with the New Haven had purchased the Boston & Maine stock, but he did not want to quibble about details. How the stock had been acquired was “immaterial. The [New Haven] stands here before the committee, to all intents and purposes, as if it had done it itself. I do not dodge one bit. I defy any man to show that I have not kept my pledges to the State.” When asked if he had read Brandeis’s bill, Mellen said that he had, and could only raise one objection to it: “It wasn’t strong enough. I would amend the bill by requiring the New Haven road to sell the stock and prohibit anyone from buying it…. And I’d put anybody in prison who discussed the subject.” One might have thought that Mellen’s arrogance would have annoyed the committee members, that his admission that the New Haven had bought the stock, even though he had promised not to, would have led to some sharp questions, but it did not.
Toward the end of the day, as Mellen finished his testimony, Brandeis rose and asked permission to put a few questions to him. Of course, the committee chair said, but then told Mellen that he did not have to answer. The New Haven president accepted the offer and said he would not give ammunition to the enemy. If Mellen will not answer questions, Brandeis suggested, “I would like to have him present while I make certain statements.” Mellen picked up his hat and immediately headed for the door, calling back, “I will read your questions in the newspapers in the morning, if you please.”
Brandeis later said that Mellen’s exit had probably been fortunate for the antimerger side. The New Haven head had great presence and spoke well and “had sort of mesmerized the people. I had grave doubts as to whether I should not be the sufferer from cross-examining him.” The deprecating remark is somewhat out of character for the supremely self-confident Brandeis, but it acknowledged the fact that at the time Mellen and his vision of a unified New England transportation system carried a great deal of popularity, especially in the legislature. While the lawmakers could not bring themselves to ratify Mellen’s purchases, they rejected the Brandeis bill and passed another measure, sponsored by Speaker John Cole, allowing the New Haven to hold the Boston & Maine stock until 1 July 1908.
Brandeis continued to hammer away at the merger, both in news paper interviews and in speeches. The New England Dry Goods Association invited him and Charles F. Choate Jr., the New Haven’s counsel, to debate the issue at its meeting in February 1908. Choate declined, leaving Brandeis to pillory the company and its officials unopposed. He ticked off one reason after another why the people should fight the merger: the New Haven had defied Massachusetts law; the New Haven had not kept its promises to the legislature; the result would be a monopoly, and therefore by definition bad for the region; even worse, this would be a monopoly controlled by aliens and alien interests; large companies were not as efficient as small ones; such a combination created dangers in politics, because it could use its huge resources unscrupulously. In addition, Brandeis began claiming that the New Haven no longer enjoyed the financial strength that it had before Mellen took over, and that the acquisitions had weakened it even more.
Fairly early in the battle, Brandeis realized that the costs of the street railways, as well as the purchase of the Boston & Maine stock, must have levied a heavy drain on the railroad’s resources. According to all published reports, the purchases had been paid for by the New Haven, either through its own reserves or by borrowing; there had not been any infusion of new money from J. P. Morgan & Company, the firm that controlled the New Haven. Brandeis wrote to his brother in October 1907 that he had been struggling with the New Haven reports trying to figure out the railroad’s real financial condition, and if it had truthfully provided required information to the Interstate Commerce Commission and the Massachusetts Railroad Commission, there ought to be some “fun” in finding out the facts.
“I think before we get through,” he told Alfred,
the estimable gentlemen who scrambled for the chance of exchanging their B & M stock for New Haven will feel that they have been served to a gold brick. At present stage of investigation it looks as if Mellen had gone ahead like other Napoleons of finance joyously as long as borrowing was easy & that he will come up against a stone wall as soon as his borrowing capacity ends. There are some indications that it has ended (with his stock at 139), and that he is resorting to all kinds of devices to get money. I have not been able to figure out yet from data available what he has done with all the money he raised & should not be at all surprised to find that some had already gone into dividends.
In the end this would prove to be the New Haven’s undoing, but Brandeis’s constant harping on the alleged financial weakness of the railroad brought down the wrath of Boston’s financial and business establishment on his head. In the midst of the fight the Good Government Association asked Brandeis to run for mayor against John Fitzgerald, whom Brandeis and other mugwumps detested as the worst kind of machine politician. Although tempted, Brandeis declined, and as he told Alfred, “The chances of a really good fight were not the best. My course in knocking heads right and left is not exactly such as to create an ‘available’ candidate.”
Mellen had convinced many that a unified transportation system would be the answer to Massachusetts’s and especially Boston’s trade problems and would put the city in a superior competitive position vis-à-vis Philadelphia, New York, and other East Coast ports. Although Brandeis did not believe that would actually happen, he conceded that people could disagree on that point. Business interests in Boston, however, had always viewed New Haven as well as Boston & Maine shares as gold-plated investments. The New Haven had paid a dividend of 8 percent or more since 1872. New England colleges, boarding schools, and church endowments all had significant investments in the New Haven; it constituted the traditional “widows-and-orphans” stock found in conservatively managed trust funds.
By attacking the New Haven’s financial condition and practices, Brandeis in effect challenged not only the business sense but the financial integrity of the city’s leading banking and investment houses. They had recommended New Haven stock to their customers and had invested heavily themselves. One might have thought that they would welcome information that could lead to the protection of their money, that if, as Brandeis charged, the New Haven’s resources had been stretched beyond safe margins, then they ought to pull out and put their money in more secure places. Instead, they attacked not the news he brought but the messenger, blaming him for the eventual ruin of the road and losses of millions of dollars.
This attitude was personified by Major Henry Lee Higginson, a senior partner in Boston’s leading investment house, Lee, Higginson & Company. Brandeis had spent the Fourth of July weekend in 1890 as a guest of Higginson’s at his summer home on Lake Champlain, “communing,” as he put it, “with the great and the good.” Mrs. Higginson had been the first person to call on Alice after she and Louis returned from their honeymoon. At the time, Higginson and others saw Brandeis as a bright, young, and extremely capable lawyer whose interests dovetailed with their own. That identification began to erode during the fight over the Boston Elevated, since the State Street financial elite had backed one or more of the contenders for the new lines. Brandeis had initially believed that Higginson would be delighted with the outcome, since the Elevated had been financed by his archrival in the financial district, Kidder, Peabody, and wrote to him suggesting that he might wish to contribute to the costs of the Public Franchise League. Higginson never replied.
As the pace of the merger battle picked up, Brandeis’s accusations involved not just Charles Sanger Mellen but lawyers and bankers closely connected to the New Haven. A subcommittee of the Massachusetts Commission on Commerce and Industry approved the Boston & Maine merger, and Brandeis pointed out that the subcommittee had been composed of three corporation lawyers all closely connected to the New Haven and therefore certainly not impartial. One of those lawyers also counted Higginson as a client, and Higginson’s company had not only suggested the idea of a merger between the two lines, but then acted as an intermediary in the stock purchase. All that work, all that investment, now stood imperiled because of Brandeis’s charges.
“Brandeis and his gang,” Higginson wrote to Governor Eben S. Draper, “have misrepresented and used every indecent means to corrupt the public mind and deceive people.” Higginson told a Treasury official in Washington that no one “should believe Brandeis on oath.” In fact, no one in the Boston bar had a good word for him, and “if he had friends before, they have vanished.” When Woodrow Wilson considered appointing Brandeis to his cabinet in late 1912, Higginson and his friends lobbied furiously, and, as it turned out, successfully, against it. Four years later they launched even more vitriolic attacks when the president nominated Brandeis to the Court.
The impetus for this fury came from a pamphlet Brandeis published in December 1907, the sensational Financial Condition of the New York, New Haven & Hartford Railroad Company and of the Boston & Maine Railroad. After working for several months, and getting no help at all in his frequent requests for information from the New Haven, Brandeis had resorted to the reports that the railroads by law had to file with the Massachusetts Board of Railroad Commissioners and with the Interstate Commerce Commission. Although anyone could get these documents, apparently no one, least of all those responsible for advising clients to buy New Haven stock, had bothered to examine them closely. From those materials Brandeis put forth two startling contentions. First, that the New Haven had so drained its resources that it now found itself in serious financial trouble, and “if the New Haven’s solvency is to be maintained, A LARGE REDUCTION IN THE DIVIDEND RATE IS INEVITABLE.” Second, instead of needing financial help from the New Haven, the Boston & Maine enjoyed a sounder financial condition, and those resources would in all likelihood be drained away by the New Haven. As he told a Boston Journal reporter, getting the facts had been very difficult, and there had been “obstacles that at times seemed to be well-nigh insurmountable.” But he had gotten at what he considered the truth, and he wanted the pamphlet to be given as wide a distribution as possible among the stock-and bondholders of the two lines.
Brandeis intended that group to be aware of the problems, but not necessarily in order to protect their investment. Rather, he hoped that they would display old-fashioned New England outrage at the misuse of their money and demand change. “You are mistaken in supposing that my effort to defeat the merger is with a special desire to protect capital,” he told one correspondent. “Capital must be protected in order to protect the community, but I have no special interest in the protection of capital. What I desire is to protect the community from the evils which will attend a monopoly of transportation by the New Haven, and the discussion of financial questions is only incidental.” Comments such as this did not endear Brandeis to State Street.
The reaction proved even more negative than Brandeis had expected. The business press, of course, attacked him as a simpleton who had no idea of business and did not know how to read technical financial reports. Even newspapers that had supported him in other endeavors puzzled over the pamphlet. If he was right, the Boston Traveler asked, why had no one else found this out? The Boston Herald just attacked him outright, claiming that his antimerger mania had gotten him to the point that everything would now fall, “the state destroyed, the republic gasping its last breath, and humankind swept away from the starry watches of the night.” Only the Boston Evening Transcript treated his analysis with respect and reprinted a good part of it. The pamphlet, Louis told Alfred with some understatement, “has created quite a stir. The New Haven people have supported the stock and I am told their bankers advise them not to answer it. If they don’t Mellen is doomed—and I don’t believe they can. Nothing but a miracle of good times could make their way smooth.” And, rather candidly, he admitted, “I have made a larger camp of enemies than in all my previous fights together.”
BRANDEIS TRIED TO USE the same tactics in the merger fight that he had used previously. At the same time he issued the pamphlet, he organized the Massachusetts Anti-merger League, modeled upon and with a leadership almost identical to the Savings Bank Insurance League. He bombarded newspapers with “facts,” gave speeches around the state, and tried to educate the people on what he considered the evils that the merger posed. When he heard of someone opposed to the merger, he immediately tried to enlist that man in the cause. But none of these tactics worked—at least not in time. Unlike the savings bank fight, where the insurance companies had been tainted from the start because of the scandals, the New Haven enjoyed a sterling reputation and had the support of a good part of the influential business and banking community. In response to the Anti-merger League, New Haven allies created the Business Men’s Merger League, which sponsored legislation, wrote letters to the newspapers, and did all those things that Brandeis had shown to be effective in the savings bank fight.
Politically, the New Haven easily outgunned the opposition, and even exposure for creating false news and making untrue statements about Brandeis’s alleged private interests (such as that he was allied with the Harriman rail interests against Morgan) did little to dampen support for the merger. Unlike the antimerger people, who desperately needed state legislation to force the New Haven to divest itself of street railways and the Boston & Maine, Mellen could live, indeed thrive, on delay, and when the legislature failed to pass any measures concerning the road, it meant a victory. The longer he kept control of the Boston & Maine and the other properties, the harder it would be in the end to force them apart. To a decision by the Massachusetts Supreme Judicial Court in May 1908 that the New Haven had acquired its interurban railways illegally—and by implication the Boston & Maine as well—followed by a suggestion from the state’s highest-ranking law officer that the street railways that had been sold to the New Haven should have their charters revoked, Mellen responded with a shrug. “I certainly am not disturbed by the opinion of the attorney general.” Moreover, since implementing the court’s decision would require legislation, Mellen and the Boston & Maine president, Lucius Tuttle, worked to block any measures introduced by opponents of the merger.
Brandeis kept writing, speaking, analyzing. He went to “a Jewish club where I talked merger last evening,” he told Al, and in fact had been out every night during the week arguing against the New Haven. He pored over the line’s quarterly reports, and its 31 March 1908 statement showed that in the previous nine months it ran a deficit of $2.9 million, although it continued to pay the 8 percent dividend. He believed the figures did not reflect the true extent of the deficit, since the line had to borrow $25 million to expend on equipment. He did not see how it could keep going this way without soon reducing the dividend. But in the meantime, “the merger fight goes on gaily,” he claimed, and “we have made great progress with the public.”
The fight went on, perhaps even “gaily,” but although a few papers had begun to pay attention to the charges, few converts had been made. In March 1908, despite Brandeis’s best efforts to convince it of the evils involved in the merger, a majority of the Massachusetts Commission on Commerce and Industry issued a report vindicating the New Haven on all points. Then, in June, Brandeis seemingly had a victory. The Cole Act would expire on 1 July, leaving the Boston & Maine stock still in the hands of the New Haven. In the legislative session the antimerger forces, ably led by Norman White, defeated every effort to secure a bill permitting the New Haven to keep the stock, and the House even passed a measure denouncing the purchase of the stock as against the Commonwealth’s laws. Back in April, Brandeis had testified for two days before the railroad committees, trying to get them to understand the issue and enact the necessary legislation. He lobbied newspaper editors for their support, and in addition to a copy of the antimerger bill sent out a short memorandum titled “What to Do Next?” as a basis for possible editorials.
In the end, no law passed, which Brandeis saw as a complete victory, because now the New Haven, despite Mellen’s bluster, would have to sell the Boston & Maine stock in order to comply with the state supreme court decision. “You must come to South Yarmouth to hear all the tale of merger killing,” he crowed to his brother. “Nothing remains now but to bury the corpse…. I had expected two years of agony for the New Haven—& of labor for us. But death came quickly as a relief to all.” He went on to predict that the New Haven, which had just declared a regular dividend of 2 percent for the quarter, would not be able to do that much longer.
As he settled in for what he thought would be a quiet summer on Cape Cod, Brandeis might be forgiven for his optimism. He had been under prolonged attack for the better part of a year, although, he claimed, “I have not suffered in mind and body, and the only effect upon my estate is to leave me more time to pound the enemy.” He had seriously underestimated Charles Sanger Mellen.
EARLY IN JULY, Mellen “sold” the Boston & Maine shares held by the New Haven to a syndicate headed by John L. Billard, a wealthy Connecticut coal operator. Mellen justified the cost in legal fees and transfer taxes because “it thus leaves in friendly hands the control” of the properties. At some point, he predicted to his board, common sense would prevail in Massachusetts, and full ownership of these properties would be restored to the New Haven. On reading the news, Brandeis said that it “suits me entirely. If it is genuine it is what we want.” If not genuine, then the New Haven leadership “must be even more kinds a fool than I have found the present management.”
The New Haven seemed beset by attacks on other fronts as well. Attorney General Charles J. Bonaparte had filed a petition under the Sherman Antitrust Act to perpetually bar the New Haven from holding the Boston & Maine stock as well as the stock of any interstate trolley lines. In early 1909, Brandeis met with representatives of the Interstate Commerce Commission to discuss the New Haven’s financial picture, and that same month Massachusetts Attorney General Dana Malone announced that he would look into whether an 1874 statute, requiring revocation of charters of railroads that broke the law, might be invoked against the street railways owned by the New Haven. Brandeis kept digging for facts, sending letters to the Board of Railroad Commissioners asking for information to explain numbers in the New Haven reports that appeared wrong to him. As late as 8 April 1909, he believed that the antimerger forces would be able to secure passage of their legislation at the current session.
Mellen, however, had a powerful ally in the new governor, Eben S. Draper, who had not said a single word about the New Haven in his campaign. On 20 April 1909, Draper urged the assembly to pass a bill that would charter an agency to purchase and hold stock in the Boston & Maine and allow any railroad incorporated under Massachusetts law to provide financing for that purchase. A few weeks later the Railroad Committee received a bill endorsed by Draper, but drafted by the New Haven attorneys, that authorized chartering a holding company for the sole purpose of holding the stocks and bonds of the Boston & Maine. Brandeis, who had hoped the merger dead, now awoke to the new danger. They had beaten the New Haven and its business friends, but this new bill “with all the power of the gubernatorial position and party whip is very threatening.” Brandeis wrote one letter after another and buttonholed as many legislators as he could, but to no avail.
The end came quickly. The governor pushed his bill through the Republican-controlled assembly. The Boston Railroad Holding Company Act, or Draper Act, of 1909 legitimized the marriage of the New Haven and the Boston & Maine and, aside from the fact that it included the word “Boston” in its title, did nothing to protect the Commonwealth against any decisions the New Haven might make in regard to its new acquisition. Technically, the New Haven would not own the Boston & Maine stock outright, but it would own the holding company that owned the stock. Despite the protests of people like Representative Charles G. Washburn that the bill was “poor business, poor law, poor politics [and] poor ethics,” Governor Draper imposed party discipline, denied any opportunity for amendments, and the troops, including a number of members who had previously opposed the merger, fell into line. As Louis told his brother, “Amidst innumerable broken promises of support we got unmercifully licked but it took all the power of the Republican machine & of Bankers’ money to do it, and I am well content with the fight made.”
Brandeis had already suspected the Billard sale to have been a fraud, and events soon justified his apprehensions. The new holding company bought Billard’s Boston & Maine stock, giving him a profit of $2 million on the transaction. Mellen, in explaining the transaction to his board of directors, assured them that the price had not been too high, because during the year or so that Billard had “owned” the stock, the New Haven effectively controlled the Boston & Maine. “For his service in securing to the New Haven immunity from attack by Massachusetts authorities,” Mellen declared, “Mr. Billard’s compensation was modest and moderate, and he might well exclaim, as did Warren Hastings at his celebrated trial, ‘My God, when I consider my opportunities, I wonder at my moderation.’” Ironically, Henry Lee Higginson, who certainly had the opportunity to know the true circumstances of the Billard purchase, bristled when Brandeis and Norman White began charging that the sale had been a fraud. People like them, he alleged, who “do not believe that Mellen sold the Boston & Maine shares … probably are themselves in the habit of lying.”
Given the circumstances of a business community generally in favor of consolidation and an assembly unwilling to enforce existing law, Brandeis and his allies could never work up the type of public interest and support they enjoyed in the insurance fight. Even later, after Brandeis’s predictions came true, supporters of the merger never suffered any rebuke at the polls. With the state sanction for the new arrangement, the federal government dropped its antitrust charges against the New Haven, and in the summer of 1909 Mellen might well have congratulated himself that his plans for unifying all of New England’s transportation had few obstacles in sight—providing, of course, that that pesky Brandeis fellow’s predictions of financial ruin could be avoided.
EVEN IF HE WOULD subsequently be vindicated, Brandeis had lost the fight, and news that the Justice Department had abandoned his suit did not make him any happier. “I am rapidly becoming a Socialist,” he told his brother. “What the bankers leave undone their lawyer minions supply.” But Brandeis had a great deal of faith in the facts that he uncovered, and although his predictions of imminent disaster did not materialize, he did grasp what other people either failed to see or, in the case of the State Street bankers, refused to see—that the New Haven’s finances had been seriously weakened because of the huge outlays required to buy the electric rail systems and the Boston & Maine, and that it could only pay the 8 percent dividend by diverting funds from areas such as equipment maintenance and replacement. He may have lost the battle, but he had no intention of abandoning the campaign.