Kansas City Power & Light Company v. McKay

• Decision Date: 28 April 1955
• Docket Number: No. 12067.,12067.
• Parties: KANSAS CITY POWER & LIGHT COMPANY et al., Appellants, v. Douglas McKAY, Secretary of the Interior, et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

96 US App. DC 273, 225 F.2d 924 (1955)

KANSAS CITY POWER & LIGHT COMPANY et al., Appellants, v. Douglas McKAY, Secretary of the Interior, et al., Appellees.

No. 12067.

United States Court of Appeals District of Columbia Circuit.

Argued October 4, 1954.

Decided April 28, 1955.

Petition for Rehearing Denied June 3, 1955.

Certiorari Denied November 7, 1955.

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Mr. Raymond T. Jackson, Cleveland, Ohio, of the bar of the Supreme Court of Ohio, pro hac vice, by special leave of Court, and Mr. Richard L. Arnold, Texarkana, Ark., with whom Messrs. E. Fontaine Broun and Henry T. Rathbun, Washington, D. C., were on the brief, for appellants.

Mr. Morton Liftin, of the bar of the Supreme Court of New York, pro hac vice, by special leave of Court, with whom Messrs. Leo A. Rover, U. S. Atty., Paul A. Sweeney, Atty., Dept. of Justice, and Theodore H. Haas, Atty., Dept. of the Interior, were on the brief, for appellees. Messrs. Lewis A. Carroll and Samuel L'Hommedieu, Jr., Asst. U. S. Attys., entered appearances for appellees.

Mr. William C. Wise, Washington, D. C., filed a brief on behalf of N. W. Electric Power Cooperative, Inc., et al., as amici curiae, urging affirmance.

Before PRETTYMAN, BAZELON and WASHINGTON, Circuit Judges.

Certiorari Denied November 7, 1955. See 76 S.Ct. 137.

WASHINGTON, Circuit Judge.

This case involves the question whether utility companies which claim they are in competition with a federally-supported power program can obtain the aid of the courts in challenging the validity of that program.

Plaintiffs-appellants, electric utility companies operating in Kansas, Missouri and Arkansas, ask for relief under the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, against the Secretaries of the Interior, Agriculture and the Treasury and the Administrators of the Southwestern Power Administration ("SPA") and of the Rural Electrification Administration ("REA") as defendants: (1) enjoining them from lending or disbursing funds of the United States to SPA or to certain federated power cooperatives for the construction by the latter of electric generating and transmission facilities and for the sale and purchase of electric power to and from them by SPA; (2) enjoining them from doing anything in furtherance of an alleged plan by which SPA would in effect construct and acquire control of these generating and transmission facilities contrary to law; and (3) declaring that they have no right, power or authority to carry out the alleged plan.

Defendants moved to dismiss the complaint for the reason, among others, that plaintiffs did not have the capacity and did not show any injury or interest entitling them, to maintain the suit. The District Court denied the motion to dismiss on the ground that the instant case does not fall within the rule of Alabama Power Co. v. Ickes, 1938, 302 U.S. 464, 58 S.Ct. 300, 82 L.Ed. 374. Thereafter, upon trial of the issue of the legality of the loan contracts and lease agreements entered into by the defendants, the District Court held, 115 F.Supp. 402, that those contracts and agreements were valid and authorized by the Rural Electrification Act and the Flood Control Act of 1944, respectively. From the final judgment for the defendants the plaintiffs, other than Missouri Edison Company, have appealed.

Defendants SPA and REA have made contracts with five federated cooperatives,¹ including Northwest Electric Power Cooperative, Inc. ("Northwest"). The contracts with Northwest, which are substantially the same as the contracts with the others, will be summarized. The Government, acting through REA, for "the purpose of furnishing electric energy to persons not receiving central station electric service" has agreed to lend Northwest money for the construction of an electric generating plant and transmission lines, substations, transformers and related facilities in certain described rural areas. Northwest is obligated to repay the loan within 35 years, which the revenue derived from the sale of the newly-created power output will enable it to do. Under a separate agreement with SPA, Northwest is to construct a transmission line from the Government-owned Bull Shoals Reservoir in Arkansas to the proposed generating plant, and is to lease the line to SPA for a period of 40 years, with an option to purchase. Northwest also agrees to sell to SPA the power output of the new generating plant and SPA in turn will supply Northwest at a single delivery point with its power requirements. In case SPA cannot furnish all the power needed by Northwest, the latter may buy additional power from any available source.

Plaintiffs are electric power utilities, supplying electric service to a large number of customers in Missouri, Kansas and Arkansas, including rural electric distribution cooperatives to whom central station service is rendered. None of them has exclusive franchises to supply electric power. They have programs, in various stages of planning or execution, to expand their facilities to meet estimated increases in demand for electric energy from all of these consumers and customers. They claim that the contractual arrangements made by REA and SPA with the federated cooperatives will thwart their plans and duplicate their facilities (existing, under construction, or authorized), which are or will be available to serve the federated cooperatives' demand for central station service. They contend that the contracts violate the loan standards of the Rural Electrification Act of 1936;² that SPA's power rates are uneconomical, and that the congressionally-imposed restrictions on SPA's activities have been violated, contrary to the provisions of the Flood Control Act of 1944;³ that the contracts enable the federated cooperatives to engage in destructive federally-subsidized competition with plaintiffs; and that the defendants (other than the Secretary of the Treasury) are misusing the lending powers of REA to obtain for SPA control or ownership of the large steam generating plants and transmission lines built by the federated cooperatives, contrary to the intent of Congress, the Constitution and the laws above referred to.

It is indisputable that the essence of plaintiffs' complaint is the competition which they will suffer if the Government's contracts are carried out. They can claim no other interest or injury. The defendants have not undertaken to regulate them in any way. They have not been ordered to abandon any of their activities or to forego the expansion programs planned by them. They have not been subjected to any obligation or duty. Their sole interest and objective is to eliminate the competition which they fear. Controlling decisions of the Supreme Court, dealing with other electric power contracts of the Federal Government, establish that an interest of this kind is not sufficient to enable them to sue to enjoin execution of the power contracts and program of the Government. See Alabama Power Co. v. Ickes, 1938, 302 U.S. 464, 58 S.Ct. 300, 82 L.Ed. 374; Duke Power Co. v. Greenwood County, 1938, 302 U.S. 485, 58 S. Ct. 306, 82 L.Ed. 381; Tennessee Electric Power Co. v. T. V. A., 1939, 306 U.S. 118, 59 S.Ct. 366, 83 L.Ed. 543.

In the Alabama Power case, suit was brought to enjoin the execution of contracts for the lending and grant of money to certain cities for the construction of municipal electric distribution systems, on the ground in part that the contracts were not authorized by statute. It was contended that such contracts would establish rival and competing plants resulting in loss of business to the plaintiff. The Supreme Court, affirming this court, took the view that the power company was without standing to challenge the validity of the contracts by suit. The Court stated:

"The only pertinent inquiry, then, is, what enforceable legal right of petitioner do the alleged wrongful agreements invade or threaten? If conspiracy or fraud or malice or coercion were involved, a different case would be presented, but in their absence, plainly enough, the mere consummation of the loans and grants will not constitute an actionable wrong. Nor will the subsequent application by the municipalities of the moneys derived therefrom give rise to an actionable wrong, since such application, being lawful, will invade no legal right of petitioner. The claim that petitioner will be injured, perhaps ruined, by the competition of the municipalities brought about by the use of the moneys, therefore, presents a clear case of damnum absque injuria. Stated in other words, these municipalities have the right under state law to engage in the business in competition with petitioner, since it has been given no exclusive franchise. If its business be curtailed or destroyed by the operations of the municipalities, it will be by lawful competition from which no legal wrong results." 302 U.S. at pages 479-480, 58 S.Ct. at page 303.

The Court further made it clear that one whose only injury will result from lawful competition has no standing to question whether the contracts with the municipalities were authorized by statute and thus legal. It said:

"Can any one who will suffer injurious consequences from the lawful use of money about to be unlawfully loaned maintain a suit to enjoin the loan? An affirmative answer would produce novel and startling results. * * * Considered apart, the lender owes the sufferer no enforceable duty to refrain from making the unauthorized loan; and the borrower owes him no obligation to refrain from using the proceeds in any lawful way the borrower may choose." 302 U.S. at page 480, 58 S.Ct. at page 304.

Appellants undertake to escape the impact of this case on three grounds. First, they say, as did the District Court, that in the Alabama case the competition was lawful, whereas here it is unlawful, since none of the defendants, all Federal officers and agencies, have any franchise to supply electric power to the public from the States...