The Limitations of Buoyant Opportunism:
Law & the Wisconsin Lumber Industry, 1840-1930
During the heyday of Wisconsin's lumber years, about 25 percent of the state's nonagricultural work force was employed in lumber and lumber-related industries-far more than any other industry.
Great economic enterprises tend to occupy the law's attention in a degree proportional to their size. Two enterprises dominated Wisconsin's industrial economy in the late 19th century: railroads and the lumber industry. An earlier article in this series outlined the influence that railroads had on the development of Wisconsin law.1 This article examines the relationship between Wisconsin law and the swift rise and equally swift decline of Wisconsin's pineries.
At the beginning of the 19th century, Wisconsin lay in the middle of a vast belt of white pine forest that ran from eastern Canada through the upper Great Lakes states to its terminus in western Canada.2 From 1840 on, a large part of Wisconsin's work force was engaged in cutting down the pine trees and converting them to lumber and other wood products. Wisconsin's pineries produced about 20 billion board feet of lumber from 1840 to 1873; 66 billion board feet during the heyday of the lumber era between 1873 and 1898; and 16 billion board feet from 1898 to the end of the lumber era in the mid-1920s.
During the last quarter of the 19th century Wisconsin was the top lumber-producing state in the nation. Lumber and lumber-related industries employed about 25 percent of the state's nonagricultural work force, far more than any other industry. Much of the West, particularly the Great Plains states, was built with Wisconsin lumber and wood products.3
Law for an extraction-oriented industry, 1840-1873
At the beginning of the lumber era in Wisconsin, there were two major obstacles to exploiting the pineries. First, it was necessary to arrange an orderly transfer of Wisconsin timber lands from the federal government to private hands. Second, rules had to be developed for orderly use of the waterways that were necessary to get logs to market. Wisconsin's lumbermen looked to the law to help them overcome both obstacles.
Getting access to timber lands. By the late 1830s the federal government had finished acquiring the Wisconsin timber lands from the Indian tribes that originally owned them. It then began surveying the lands and arranging for their sale to the public. However, timber poaching and land fraud quickly became serious problems for both landowners and the government. Congress passed an antipoaching law in 1831; the Wisconsin Territorial Legislature did the same in 1836 and 1844.4
Efforts to enforce these laws were hampered by legislative reluctance to appropriate funds for wardens and by the prevailing public feeling that the forests were inexhaustible and that any cutting of timber, whether or not technically legal, helped further the great cause of clearing the frontier and bringing civilization to the wilderness. Furthermore, wood also was regarded as a basic necessity of life and many people did not view poaching from an absentee landowner, particularly the government, as theft.5 By 1850 both the U.S. attorney and Wisconsin district attorneys had forged a workable compromise with their constituencies: timber thieves would not be prosecuted if they would pay the going price of the timber they had poached, together with enforcement costs, and would purchase the land at issue.6
The land fraud problem arose because federal and state land policy simply failed to recognize the economic realities of the lumber business and of the timber lands. Most lumbermen would have preferred to buy timber rights rather than the timber lands themselves. Settlers were skeptical that the timber lands would make good farmland. However, Congress and the Wisconsin Legislature considered the sale of land for settlement, not the sale of timber rights, to be their proper sphere of activity, and they enacted preemption and homesteading laws that gave generous price and credit terms to settlers who would promise to homestead the land.7
To get access to timber lands, many lumber companies paid individuals to file applications for promising timber lands and to swear falsely that they would comply with the law's homesteading provisions. The companies then stripped the lands of their timber, and the nominal buyers abandoned the lands either to the lumber companies or to the government for delinquent taxes. This system left the lumber companies and the nominal buyers richer but the taxpayers poorer.8
Getting access to water. Regulation of waterways was considered a more important problem than timber trespass and land fraud. Wisconsin rose to preeminence in the lumber industry because it had a large supply of white pine, a river system that reached virtually every nook and cranny of the pineries, and easy access to lumber markets via the Great Lakes and the Mississippi River.9 Assured access to water was critical to the success of every lumbering enterprise. Competing uses of streams, and competing claims for use of streams, occupied much of the attention of both the Legislature and the Wisconsin Supreme Court throughout the late 1800s.
Probably the most common disputes were over dams and other works that the lumber companies built on Wisconsin's rivers and streams. Lumber companies engaged in a constant battle with nature to get their logs to market. In a dry year, there was fierce competition for use of the limited water flow. In a wet year, all lumbermen struggled to prevent flooding that might sweep their logs away forever. Dams could help overcome these problems, but they often created new problems for neighboring stream users. Many companies also built booms (side channels) to store logs. Only a few places on the river were suitable for booms, and those who controlled the good locations faced much legal pressure to share them with others.10
As with the early period of railroad law in Wisconsin, the most striking feature of the early period of lumber law in Wisconsin was the reluctance of both the Legislature and the supreme court to use their powers to establish a comprehensive plan or regulatory system for the industry. The Legislature could have used Wisconsin's general incorporation laws as a vehicle for systematically regulating stream use and other aspects of the industry, but it did not do so. Lumber companies preferred to incorporate under individual charters rather than under Wisconsin's general incorporation laws. Up to the 1870s, the Legislature was happy to accommodate this preference.11
In general both the Legislature and the supreme court found that the existing common law of riparian rights provided adequate guidelines for resolving the stream use requests and disputes that came before them. The three main doctrines that shaped riparian rights law in Wisconsin were riparian ownership, nuisance and reasonable use. Collectively, they provided that a public easement attached to every navigable stream, which gave everyone the right to make reasonable use of the stream regardless of who owned the land along its banks. Adjoining landowners could dam the stream or construct other works in the stream, as long as they did not damage others' property or completely obstruct others' use of the stream.12 However, nonnavigable streams were not subject to a public easement, and the Legislature had the right to confer special privileges on individual stream users even if those privileges interfered with others' use of the stream in question.13
The one real innovation that Wisconsin made in riparian rights law was in Olson v. Merrill (1877), where the supreme court held that the public easement extended not only to streams that were navigable year round but also to streams that were navigable only during the spring flood season. This gave lumbermen who used seasonal streams to get their logs to market a guarantee that their rivals could not block their access to market.14
Law for a vertically integrated industry, 1873-1898
The trend to incorporation. In the late 1860s and
early 1870s the lumber industry entered a new, more mature 
phase in which it made
new demands on the law. Many of the more successful lumber companies had
grown to a size that did not permit their owners to continue to manage
all of the companies' affairs personally. Many of these companies were
expanding from a simple timber cutting operation to a vertically
integrated system in which they not only cut timber but also sawed it,
converted it into finished lumber and wood products and sold those
products in their own retail yards. The companies usually needed outside
capital to make such an expansion. As a result, more and more companies
converted from partnerships into corporations.15
Prior to 1871 most lumber companies that incorporated did so by obtaining individual corporate charters from the Legislature. Wisconsin had a general incorporation law, but it was little used because it required extensive public disclosure of financial and operational information, and it made directors personally liable for employee wages and certain other corporate obligations.16 In 1871 the state constitution was amended to prohibit special charters of incorporation.17 There is no evidence that the lumber companies actively opposed this amendment, even though incorporating under the general incorporation laws would subject them to new reporting requirements and to new liabilities. This lack of opposition suggests that the industry was well-enough established by this time that most lumber companies felt they no longer needed special protection.
Cracking down on timber poachers. As the lumber industry grew and became established, it also took a more severe view of timber poaching. "The once-struggling pioneer lumberman had become a highly respected, often wealthy businessman who had to observe the code of ethics upon which his new status rested. He could not compete with the upstart, dishonest adventurers who still maintained the old frontier attitude."18 In Single v. Schneider (1872), the Wisconsin Supreme Court sanctioned the earlier lenient attitude toward poachers by ruling that if a poacher increased the timber's value by sawing it or making it into finished products, he was entitled to keep the extra value.19
The Legislature reacted in 1873 by passing a law allowing a timber owner to recover the highest value of the timber at any time between the time of cutting and the time of trial-in other words, depriving the poacher of the value he added to the timber. This law was supported and indeed shepherded through the Legislature by lumber interests.20 When Secretary of the Interior Carl Schurz initiated a federal campaign in 1877 to vigorously prosecute poachers and move away from the old system of allowing them to simply pay for poached timber when caught, he received strong support from the lumbering community.21
Cartelization of the lumber industry: the Beef Slough wars and the Chippewa Pool. Starting in the 1860s, numerous efforts were made to form cartels to control the supply and price of timber, which was another sign of the maturation of the lumber industry. Some of these efforts were successful but most were not, due to the inherent difficulty of holding any cartel together, due to a lingering individualistic spirit among the older lumbermen, and due to continuing geographic rivalries and riparian rights disputes.22 The biggest and most famous dispute, which ultimately resulted in the largest cartel, was the Beef Slough controversy.
Beef Slough in Buffalo County was the only place at the mouth of the Chippewa River that could be used for sorting and storing logs run down the river. Thus control of the slough was crucially important for lumbermen operating in the Chippewa Valley. About 1865 a group of investors from Michigan and eastern Wisconsin began buying large quantities of land in the valley. In 1866 a group of Eau Claire-area lumbermen reacted against this perceived threat by buying Beef Slough and obtaining a legislative charter giving them the exclusive right to construct improvements on it. In 1867 the eastern group organized a corporation to construct a dam and other improvements on the slough and quickly began construction so it could control the slough. The two groups then went to war in the Legislature; the war ended only when the eastern group went bankrupt in 1870.23
The Eau Claire group's triumph, however, was short-lived. Frederick Weyerhaeuser, an Illinois lumberman, had begun making major investments in Chippewa Valley timber in the mid-1860s. He realized that no one could make a profit in the valley unless the Beef Slough dispute was resolved, and in 1870 he organized the Mississippi River Lumber Company to buy out the eastern group's rights in the slough. The Eau Claire group continued to try to block Weyerhaeuser's operations at the slough, first through vigilante action and then through the Legislature and the courts. Its efforts were unsuccessful.24
By the end of the 1870s the Eau Claire group finally concluded that
it could not defeat Weyerhaeuser. The 
coup de grace came in 1880, when
heavy spring floods swept much of the Eau Claire group's winter log
harvest into facilities controlled by Weyerhaeuser. The Eau Claire group
then opened negotiations with Weyerhaeuser and his attorney, Roujet
Marshall. The end result was that in 1881 the Eau Claire group and
Weyerhaeuser joined to create the Chippewa Logging Company, better known
as the "Chippewa Pool."
Under the pool agreement, Eau Claire lumbermen were to receive 35 percent of all timber cut by pool members, and downriver operators (among which Weyerhaeuser held a majority interest) were to receive 65 percent. Weyerhaeuser was given power to make all management decisions for the pool. The pool essentially destroyed the independence of most Eau Claire lumbermen, but in return it gave them security in the form of a guaranteed supply of logs and a less competitive, more stable lumber market.25
Apparently no significant antitrust challenge was ever mounted against the pool. The Sherman Act was not enacted until 1890, and Wisconsin did not enact a state antitrust law until 1893.26 In 1891 the Mississippi Valley Lumbermen's Association was formed; its members controlled about 90 percent of the pine production in Wisconsin and Minnesota. The association promptly set about fixing lumber prices throughout the upper Mississippi valley. A federal grand jury in Minnesota indicted leaders of the association in early 1892 under the Sherman Act, but in United States v. Nelson (1892), the court dismissed the indictment on the ground that "unless the agreement involves an absorption of the entire traffic in lumber, and is entered into for the purpose of obtaining the entire control of it with the object of extortion, it is not objectionable to the statute."27
The Nelson decision represented an extremely narrow reading of the Sherman Act and was soon discredited by other decisions.28 The newness of the Sherman Act and the fact that the court was operating in an age of judicial support for laissez-faire economics probably contributed to the decision, but the court also may have been influenced by the fact that lumber prices were highly sensitive to demand and by the fact that the evidence of the Association's market power was not very clear.
Conservation and the Cutover, 1898-1930
The struggle over the constitutionality of conservation. By the early 1880s it was apparent to anyone who looked carefully that Wisconsin's supply of white pine was dwindling rapidly, and the lumber industry and the public began to realize for the first time that the state's forests were exhaustible.29 The lumber industry solved the lumber supply problem for the short run by cutting lower grades of timber-mostly hemlock, cedar and hardwoods-which it previously had bypassed. Spurred by necessity, in 1895 the Legislature established a Board of Emigration that encouraged newcomers to Wisconsin to buy land from the lumber companies in the "cutover" area and develop it for farming.30 In 1897 the Legislature created a new commission to study forest conservation measures and make recommendations for further legislation.31
The study process moved very slowly, but public sentiment grew for increased governmental involvement in conservation. Between 1903 and 1911, the Legislature finally passed a series of acts collectively known as the Forestry Law. Among other things, the Forestry Law: 1) created a state board of forestry and a state forest reserve; 2) terminated all sales of state forest lands in northern Wisconsin and made the remaining lands part of the forest reserve; 3) authorized the state to sell timber and other products from the forest reserve consistent with sound conservation practices; 4) decreed that timber sale proceeds should be used to buy additional lands for the reserve; and 5) made a special appropriation from the general fund for the purchase of reserve lands.32
However, in State ex rel. Owen v. Donald (1915) (popularly known as the "Forestry Case"),33 the supreme court struck down the law. In an opinion written by Justice Roujet Marshall, Weyerhaeuser's former counsel, the court expressed a "deep emotional reaction against the style of legal action that the [law] represented. These feelings grew naturally out of the confrontation between men bred in the buoyant opportunism of nineteenth-century action and an emerging twentieth-century insistence on closer, more professional rationalization of economic and social processes."34
The court ruled that the Forestry Law violated several provisions of the state constitution, most importantly Article VIII, section 10, which prohibited the state from sponsoring or funding "internal improvements." Marshall refused to concede that the definition of "internal improvements" should be interpreted in light of Wisconsin's changing conditions and needs. He firmly rejected the argument that the Forestry Law's long-term program for developing a forest reserve was a public purpose within the scope of the Legislature's general powers. He went out of his way to emphasize that the rights of the individual, not the use of government to provide for the common good, forms the central theme of American life. He was adamant that government had no right to provide for future needs as well as current needs:
"There must be some present benefit. It is not sufficient that the forced contribution will be a boon to some future generation. The state has no right to take the property of individuals presently and afford them no possible return, merely because the storehouse, being filled, will be opened sometime, depending upon Providence and the majority as to when, for the enrichment or comfort of the people then in being in which the taxpayer has no special interest which reasonably demands any such sacrifice."35
Of the court's seven members, only Chief Justice John Winslow took issue with Marshall. In a concurring opinion, Winslow agreed that the Forestry Act had flaws that required its invalidation. However, he differed greatly from Marshall as to the scope of the state's powers. Winslow argued that the state had the power to appropriate funds for any public purpose, whether it created an immediate benefit or not. He argued that forest conservation is not an internal improvement prohibited by the constitution: the internal improvements clause was meant only to keep the state out of projects that could be performed by the private sector, and it was unrealistic to think that any private enterprise would undertake conservation and reforestation. Winslow conceded that conservation "has not been recognized as [a public purpose] until recently perhaps, but that is merely because the conditions which make it such have only recently arisen and become acute."36
 Joseph A. Ranney, Yale 1978, is a trial lawyer
with DeWitt Ross & Stevens S.C., Madison. He is the author of
several articles on legal and historical topics. |
Marshall's opinion soon became academic. Supporters of conservation formulated a constitutional amendment allowing the Legislature to create and fund conservation programs. The amendment passed in the 1921 and 1923 legislative sessions by comfortable margins, and in 1924 the voters approved it by a 66 percent to 34 percent margin. Marshall was defeated for reelection in 1917 by Walter Owen, who, as attorney general, had defended the Forestry Law before Marshall and the court.
Use of the law to salvage the Cutover. In the late 1920s the Legislature also passed several other laws targeted at problems that arose as the lumbering era in Wisconsin came to an end. Efforts to encourage farming in the "cutover" region of Wisconsin had met with mixed results during the 30 years since the Legislature had first encouraged settlement of the land for farming. The sandy soil on which Wisconsin's white pine stands had thrived did not prove suitable for most types of farming. As a result, many farm purchasers abandoned their land and stopped paying taxes on it, or remained on the land but went on county relief.37 The Forest Crop Law of 1927 provided that counties which dedicated land taken for delinquent taxes to reforestation and removed the land from their tax rolls would receive state subsidies in return.38
In 1929 the Legislature authorized counties to implement countywide zoning; it was hoped that this would encourage cutover settlers to move closer together instead of farming in isolation, thereby increasing economic activity in the cutover counties.39 Since the end of the lumber era, the cutover region has slowly moved toward a more diversified economy based on tourism, agriculture and some industry, but the effects of uncontrolled cutting and unplanned development of the region during the last half of the 19th century linger even today.
Photos: State Historical Society of Wisconsin
Endnotes
1 Ranney, Imperia in Imperiis: Law and Railroads in Wisconsin, 1847-1910, 66 Wis. Law. 26 (June 1993).
2 R.F. Fries, Empire in Pine: The Story of Lumbering in Wisconsin (Madison, 1951) (hereinafter Empire in Pine), 5-6; J.W. Hurst, Law and Economic Growth: The Legal History of the Lumber Industry in Wisconsin, 1836-1915 (Cambridge, Mass., 1964) (hereinafter Law and Economic Growth), 2-3.
3 Fries, Empire in Pine, 17-23, 77-83, 206; Hurst, Law and Economic Growth, 2-4.
4 4 U.S. Stats. at Large 472 (1831); Wis. Terr. Laws 1836, No. 29; Wis. Terr. Laws 1843-1844, p. 29. See also Fries, Empire in Pine, 187; Hurst, Law and Economic Growth, 86-87.
5 Fries, Empire in Pine, 186-92; Hurst, Law and Economic Growth, 88-98. The changing scope of Wisconsin's criminal timber trespass laws is a good example of the Legislature's ambivalence on this subject. The Legislature initially enacted criminal penalties only against those who willfully cut timber without authority. Wis. Terr. Laws 1843-1844, p. 29; Hurst, Law and Economic Growth, 87-88. The willfulness requirement was dropped in 1865; restored in 1878; and dropped again in 1893. L. 1865, c. 377; L. 1878, c. 182; L. 1893, c. 64. When Congress considered appropriating more money for enforcing the federal timber trespass law in the early 1850s, congressmen from Wisconsin and other lumber-producing states opposed any enforcement efforts at all and criticized the federal law as an obstacle to the development of their states. Fries, Empire in Pine, 187-89.
6 Fries, Empire in Pine, 186-92.
7 See, e.g., 4 U.S. Stats. at Large 390, 445 (1830-31); 12 U.S. Stats. at Large 392 (1862).
8 Fries, Empire in Pine, 179-84.
9 The Chippewa River was the single largest lumber district, but the Eau Claire, Black, St. Croix, Wolf, Wisconsin and Fox river valleys also became major lumber-producing districts. Fries, Empire in Pine, 6-7.
10 For a good general description of the mechanics of getting logs from forest to market, see Fries, Empire in Pine, 41-59.
11 Hurst, Law and Economic Growth, 413-21. During the early years of the lumber era, most lumber companies preferred to operate as sole proprietorships or partnerships rather than as corporations. See infra note 15.
12 Hurst, Law and Economic Growth, 537-41. One of the leading cases that summarizes the common law riparian rights principles as they were applied in Wisconsin, particularly the principles relating to the public's and neighboring landowners' rights to use of streams, is A.C. Conn Co. v. Little Suamico Lumber Mfg. Co., 74 Wis. 652, 43 N.W. 660 (1889). For an example of a general stream use law that reflected common law riparian rights principles, see L. 1881, c. 220.
13 Hurst, Law and Economic Growth, 541-48.
15 Fries, Empire in Pine, 88-90, 102-03; Hurst, Law and Economic Growth, 413-21; C.E. Twining, Downriver: Orrin H. Ingram and the Empire Lumber Company (Madison, 1975), 90-91, 138-39. One reason that most companies preferred to operate as sole proprietorships or partnerships rather than corporations in the early part of the lumber era, was that the common law's concept of corporations and of limits on director, officer and shareholder liability was in flux throughout the mid-19th century, and many businessmen felt that they were more likely to achieve stability and security under special charters than under the general corporation laws. Hurst, Law and Economic Growth, 420.
16 Wisconsin's first general incorporation law is found at Rev. Stats. 1849, c. 51. During the early 1850s the Legislature added various regulatory provisions to the law. Among other things, the Legislature required corporations to make their books available for inspection by all shareholders and to provide a financial statement to shareholders at least once a year. Directors were made liable for all employee wages and for all corporate debts incurred during any period in which the financial reporting requirements were not met. L. 1853, c. 68. The law was recodified with these changes at Rev. Stats. 1858, c. 73.
18 Fries, Empire in Pine, 195.
20 L. 1873, c. 263; Hurst, Law and Economic Growth, 354-55.
21 Fries, Empire in Pine, 195.
24 The Eau Claire group argued that Weyerhaeuser's facilities were hazards to navigation, but the Legislature responded in 1872 by repealing all laws requiring an open stream to be maintained through the slough. One of the lumbermen in the Eau Claire group then brought an action claiming that Weyerhaeuser's use of fin booms at the slough was an infringement of his patent on the booms; an offer of generous royalties by Weyerhaeuser put an end to that suit. In 1877 the Eau Claire group induced the U.S. Department of Justice to file suit against the Mississippi River Lumber Company on the ground that it was impeding navigation on the Mississippi, but the court dismissed the action the next year on the ground that Congress had not taken it upon itself to specify how logging works should be constructed on the Chippewa River. See generally Fries, Empire in Pine, 145-55.
25 Fries, Empire in Pine, 155; Twining, Downriver: Orrin H. Ingram and the Empire Lumber Company, 187-90, 205-09; R.D. Marshall, Autobiography of Roujet D. Marshall (Madison, 1923), I: 272-96.
26 L. 1893, c. 219. The Wisconsin antitrust law copied language of Sherman Act § 1 (combinations in restraint of trade illegal) and Sherman Act § 2 (monopolization and attempted monopolization illegal). It is found today at section 133.03 of the Wisconsin Statutes.
27 United States v. Nelson, 52 F. 646, 647 (D. Minn. 1892). Other cartels also were formed: local cartels were formed in the Chippewa Valley, the Oshkosh area and the Wisconsin River Valley in 1875, 1879 and 1895 respectively. Wisconsin lumbermen also participated in interstate cartels. However, most of these cartels were failures. Hurst, Law and Economic Growth, 474-75.
28 See, e.g., Addyston Pipe & Steel Co. v. United States, 175 U.S. 211 (1899).
29 Questions about the ultimate fate of Wisconsin's forests and about the advisability of conservation started to surface as early as the 1860s. In 1867 a commission headed by Increase Lapham urged the Legislature to actively promote tree culture and conservation of Wisconsin's remaining forest area. The Legislature responded in 1868 by providing bounties to encourage private development of "tree belt" areas. L. 1868, c. 102. But to most people the forests still seemed limitless and clearing the land was more important than conserving it. The Legislature did nothing further for the next 25 years. Fries, Empire in Pine, 247-50; V. Carstensen, Farms or Forests: Evolution of a State Land Policy for Northern Wisconsin, 1850-1932 (Madison, 1958) (hereinafter Farms or Forests), 6-14.
31 L. 1897, c. 229; Carstensen, Farms or Forests, 21-22.
32 L. 1903, c. 450; L. 1905, c. 264; L. 1907, c. 491; L. 1909, c. 137; L. 1911, c. 639. The Forestry Law was controversial throughout the period when it was being developed and enacted. In particular, many people in northern Wisconsin were concerned that the law would impede, not help, future development of the north. Carstensen, Farms or Forests, 33-43.
34 Hurst, Law and Economic Growth, 585.
35 160 Wis. at 126. Marshall and the court also held that the act violated Article VIII, sections 4 and 6 (prohibiting the state from incurring debt except in case of emergency); Article VIII, section 9 (limiting the nature of certificates for debt which the state may issue); and Article X, section 2 (providing that proceeds from the sale of state lands must go to the state fund for public schools). 160 Wis. at 61-62, 67, 91-119.
37 Gough, Richard T. Ely and the Development of the Wisconsin Cutover, 75 Wis. Mag. Hist. 3, 11-14, 15-19 (Autumn 1991).
39 L. 1929, cc. 279, 356; Gough, Richard T. Ely and the Development of the Wisconsin Cutover, supra note 37 at 30-32; Carstensen, Farms or Forests, 91-114.
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