Gibbons v. Ogden

Landmark Ruling On Steamboats Changed American Business Forever

Illustration of Robert Fulton's steamboat
Early steamboat on the Hudson River. Smith Collection/Gado/Getty Images

The Supreme Court case Gibbons v. Ogden established important precedents about interstate commerce when it was decided in 1824. The case arose from a dispute concerning early steamboats chugging about in the waters of New York, but principles established in the case resonate to the present day.

The decision in Gibbons v. Ogden created an enduring legacy as it established the general principle that interstate commerce as mentioned in the Constitution included more than just the buying and selling of goods.

By considering the operation of steamboats to be interstate commerce, and thus activity coming under the authority of the federal government, the Supreme Court established a precedent which would impact many later cases.

The immediate effect of the case was that it struck down a New York law granting a monopoly to a steamboat owner. By eliminating the monopoly, the operation of steamboats became a highly competitive business beginning in the 1820s.

In that atmosphere of competition, great fortunes could be made. And the greatest American fortune of the mid-1800s, the enormous wealth of Cornelius Vanderbilt, could be traced to the decision that eliminated the steamboat monopoly in New York.

The landmark court case involved young Cornelius Vanderbilt. And Gibbons v. Ogden also provided a platform and cause for Daniel Webster, a lawyer and politician whose oratorical skills would come to influence American politics for decades.

However, the two men for whom the case was named, Thomas Gibbons and Aaron Ogden, were fascinating characters in their own right. Their personal histories, which included them being neighbors, business associates, and eventually bitter enemies, provided a raucous background to the lofty legal proceedings.

The concerns of steamboat operators in the early decades of the 19th century seem quaint and very distant from modern life. Yet the decision rendered by the Supreme Court in 1824 influences life in America to the present day.

The Steamboat Monopoly

The great value of steam power became apparent in the late 1700s, and Americans in the 1780s were working, mostly unsuccessfully, to build practical steamboats.

Robert Fulton, an American living in England, had been an artist who became involved in designing canals. During a trip to France, Fulton was exposed to advances in steamboats. And, with the financial backing of the wealthy American ambassador to France, Robert Livingston, Fulton began working to build a practical steamboat in 1803.

Livingston, who had been one of the nation's founding fathers, was very wealthy and possessed extensive landholdings. But he also possessed another asset with the potential to be enormously valuable: He had secured, through his political connections, the right to have a monopoly on steamboats in the waters of New York State. Anyone who wanted to operate a steamboat had to partner with Livingston, or purchase a license from him.

After Fulton and Livingston returned to America, Fulton launched his first practical steamboat, The Clermont, in August 1807, four years after he met up with Livingston.

The two men soon had a thriving business. And under New York law, no one could launch steamboats in New York waters to compete with them.

Competitors Steam Ahead

Aaron Ogden, a lawyer and veteran of the Continental Army, was elected governor of New Jersey in 1812 and sought to challenge the steamboat monopoly by buying and operating a steam-powered ferry. His attempt failed. Robert Livingston had died, but his heirs, along with Robert Fulton, successfully defended their monopoly in the courts.

Ogden, defeated but still believing he could turn a profit, obtained a license from the Livingston family and operated a steam ferry between New York and New Jersey.

Ogden had become friends with Thomas Gibbons, a wealthy lawyer and cotton dealer from Georgia who had moved to New Jersey. At some point the two men had a dispute and things turned inexplicably bitter.

Gibbons, who had participated in duels back in Georgia, challenged Ogden to a duel in 1816. The two men never met to exchange gunfire. But, being two very angry lawyers, they began a series of antagonistic legal maneuvers against each other’s business interests.

Seeing great potential, both to make money and harm Ogden, Gibbons decided that he would go into the steamboat business and challenge the monopoly. He also hoped to put his adversary Ogden out of business.

Ogden’s ferry, the Atalanta, was matched by a new steamboat, the Bellona, which Gibbons put into the water in 1818. To pilot the boat, Gibbons had hired a boatman in his mid-twenties named Cornelius Vanderbilt.

Growing up in a Dutch community on Staten Island, Vanderbilt had started his career as a teenager running a small boat called a periauger between Staten Island and Manhattan. Vanderbilt quickly became known about the harbor as someone who worked relentlessly. He possessed keen sailing skill, with an impressive knowledge of every current in the notoriously tricky waters of New York Harbor. And Vanderbilt was fearless when sailing in rough conditions.

Thomas Gibbons put Vanderbilt to work as the captain of his new ferry in 1818. For Vanderbilt, used to being his own boss, it was an unusual situation. But working for Gibbons meant he could learn a lot about steamboats. And he also must have realized he could learn a lot about business from watching how Gibbons waged his endless battles against Ogden.

In 1819 Ogden went to court to shut down the ferry run by Gibbons.

When threatened by process servers, Cornelius Vanderbilt continued sailing the ferry back and forth. At points he was even arrested. With his own growing connections in New York politics, he was generally able to get the charges thrown out, though he did rack up a number of fines.

During a year of legal skirmishing the case between Gibbons and Ogden moved through the New York State courts. In 1820 the New York courts upheld the steamboat monopoly. Gibbons was ordered to cease operating his ferry.

The Federal Case

Gibbons, of course, was not about to quit. He chose to appeal his case to the federal courts. He had obtained what was known as a “coasting” license from the federal government. That allowed him to operate his boat along the coasts of the United States, in accordance with a law from the early 1790s.

The position of Gibbons in his federal case would be that federal law should supersede state law. And, that the commerce clause under Article 1, Section 8 of the U.S. Constitution should be interpreted to mean that carrying passengers on a ferry was interstate commerce.

Gibbons sought out an impressive attorney to plead his case: Daniel Webster, the New England politician who was gaining national fame as a great orator. Webster seemed the perfect choice, as he was interested in advancing the cause of business in the growing country.

Cornelius Vanderbilt, who had been hired by Gibbons because of his tough reputation as a sailor, volunteered to travel to Washington to meet with Webster and another prominent lawyer and politician, William Wirt.

Vanderbilt was largely uneducated, and throughout his life he would often be considered a fairly coarse character. So he seemed an unlikely character to be dealing with Daniel Webster. Vanderbilt’s desire to be involved in the case indicates that he recognized its great importance to his own future. He must have realized that dealing with the legal issues would teach him a lot.

After meeting with Webster and Wirt, Vanderbilt remained in Washington while the case first went to the U.S. Supreme Court. To the disappointment of Gibbons and Vanderbilt, the nation’s highest court refused to hear it on a technicality, as the courts in New York State had not yet entered a final judgment.

Returning to New York City, Vanderbilt went back to operating the ferry, in violation of the monopoly, while still trying to avoid the authorities and at times skirmishing with them in local courts.

Eventually the case was put on the Supreme Court’s docket, and arguments were scheduled.

At the Supreme Court

In early Februrary 1824 the case of Gibbons v. Ogden was argued in the Supreme Court chambers, which were, at that time, located in the U.S. Capitol. The case was briefly mentioned in the New York Evening Post on February 13, 1824. There was actually considerable public interest in the case due to changing attitudes in America.

In the early 1820s the nation was approaching its 50th anniversary, and a general theme was that business was growing. In New York, the Erie Canal, which would transform the country in major ways, was under construction. In other places canals were operating, mills were producing fabric, and early factories were producing any number of products.

To show off all the industrial progress America had made in its five decades of freedom, the federal government even invited an old friend, the Marquis de Lafayette to visit the country and tour all 24 states.

In that atmosphere of progress and growth, the idea that one state could write a law that might arbitrarily restrict business was seen as a problem which needed to be solved.

So while the legal battle between Gibbons and Ogden may have been conceived in a bitter rivalry between two cantankerous lawyers, it was obvious at the time that the case would have implications across American society. And the public seemed to want free trade, meaning restrictions shouldn't be placed by individual states.

Daniel Webster argued that portion of the case with his usual eloquence. He delivered a speech which was later considered important enough to be included in anthologies of his writings. At one point Webster stressed that it was well-known why the U.S. Constitution had to be written after the young country encountered many problems under The Articles of Confederation:

“Few things are better known than the immediate causes which led to the adoption of the present Constitution; and there is nothing, as I think, clearer, than that the prevailing motive was to regulate commerce; to rescue it from the embarrassing and destructive consequences resulting from the legislation of so many different States, and to place it under the protection of a uniform law.”

In his impassioned argument, Webster stated that creators of the Constitution, when speaking of commerce, fully intended it to mean the entire country as a unit:

“What is it that is to be regulated? Not the commerce of the several States, respectively, but the commerce of the United States. Henceforth, the commerce of the States was to be a unit, and the system by which it was to exist and be governed must necessarily be complete, entire, and uniform. It's character was to be described in the flag which waved over it, E Pluribus Unum.”

Following Webster's star performance, William Wirt also spoke for Gibbons, making arguments about monopolies and commercial law. The lawyers for Ogden then spoke to argue in favor of the monopoly.

To many members of the public, the monopoly had seemed unfair and outdated, a throwback to some earlier era. In the 1820s, with business growing in the young country, Webster seemed to have captured the American mood with an oration that evoked the progress that was possible when all the states operated under a system of uniform laws.

The Landmark Decision

After a few weeks of suspense, the Supreme Court announced its decision on March 2, 1824. The court voted 6-0, and the decision was written by Chief Justice John Marshall. The carefully reasoned decision, in which Marshall generally agreed with Daniel Webster's position, was published widely, including on the front page of the New York Evening Post on March 8, 1824.

The Supreme Court struck down the steamboat monopoly law. And it declared that it was unconstitutional for states to enact laws that restricted interstate commerce.

That decision in 1824 about steamboats has had an impact ever since. As new technologies came along in transportation and even communication, efficient operation across state lines has been possible thanks to Gibbons v. Ogden. 

An immediate effect was that Gibbons and Vanderbilt were now free to operate their steam ferry. And Vanderbilt naturally saw great opportunity and began building his own steamboats. Others also got into the steamboat trade in the waters around New York, and within years there was bitter competition between boats carrying freight and passengers.

Thomas Gibbons did not get to enjoy his victory for long, as he died two years later. But he had taught Cornelius Vanderbilt a lot about how to conduct business in a freewheeling and ruthless manner. Decades later, Vanderbilt would tangle with Wall Street operators Jay Gould and Jim Fisk in the battle for the Erie Railroad, and his early experience watching Gibbons in his epic struggle with Ogden and others must have served him well.

Daniel Webster went on to become one of the most prominent politicians in America, and along with Henry Clay and John C. Calhoun, the three men known as the Great Triumvirate would dominate the U.S. Senate.