of Pensacola to the junction of its road with the Mobile & Montgomery Railroad, where the telegraph connected to the lines of other companies. In 1872 the Alabama & Florida railroad approached Western Union about building a second line on their right-of-way to provide cheaper service (Pensacola Telegraph was charging excessive rates as Pensacola’s port commerce grew in importance). Western Union initially attempted to purchase the Pensacola Telegraph but the price was unreasonable, so they built a second line along the railroad and ruined the Pensacola Telegraph’s business. When the Supreme Court reviewed the case in 1877, Western Union was awarded a sweeping judgment on the basis that the telegraph constituted commerce between states, and warranted federal protection against state-granted monopolies such as the Pensacola Telegraph. Western Union had essentially violated Pensacola Telegraph’s state-granted exclusive contract with the Alabama & Florida Railroad by erecting a second line (as requested by the railroad), and the Supreme Court’s 1877 decision barred Pensacola Telegraph from seeking an injunction against Western Union’s violation of the exclusive contract on the basis of protecting interstate commerce. This decision created a tremendous opportunity for Jay Gould: although a railroad could not be forced to violate its exclusive telegraph contract, it could voluntarily open its right-of- way to competing telegraphs. A competitor seeking to duplicate Western Union’s telegraph network on the major railroads would only have to provide a greater incentive to a railroad interest in a railroad, as Jay Gould did, he could violate existing exclusive contracts at will without fear of injunction, thanks to the Pensacola Telegraph decision. Furthermore, Jay that further eroded Western Union’s ability to maintain exclusive contracts with the nation’s telegraph lines in accordance with the 1866 Telegraph Act. By the time American Union was incorporated in May of 1879, Jay Gould’s path was paved for attacking Western Union’s relationship with the railroads.
American Union’s telegraph line construction was well underway during the summer of 1879. Fights were known to break out during this period over the right to build new A.U. lines alongside Western Union lines. In some cases, lines were ripped down and arrest warrants issued as the legality of such moves played out in the courts. Jay Gould was reported to be headed west with railroad men and maps to develop new telegraph networks and to perfect schemes of connections for Gould’s Western railroads, but also to secure a telegraph connection with John Garrett’s B&O for a vast network to oppose Western Union.
American Union scored a major victory during the summer of 1879 when they built new lines in Indiana along the right-of-way of the Wabash Railroad. Western Union had, since 1870, enjoyed a typical exclusive relationship with the railway. But by 1879 the Wabash was under Gould’s control when American Union erected new lines along their right-of-way. When Western Union challenged the intrusion in an Indiana circuit court, Gould was ready to test the precedent set by Pensacola. The court ruled in favor of American Union, citing that the exclusive agreement with the Wabash violated the Telegraph Act of 1866. The irony here of course is that Western Union’s earlier violation of Pensacola Telegraph’s exclusive contract with the Alabama & Florida railroad led to the ruling that enabled American Union to do just the same to Western Union on the Wabash.
By November of 1879, American Union announced that B&O’s John Garrett had joined A.U.’s executive committee. It was not long before American Union secured valuable contracts
44 Crown Jewels
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