306 U.S. 118 (1939), 27, Tennessee Electric Power Co. v. Tennessee Valley Authority

Docket Nº:No. 27
Citation:306 U.S. 118, 59 S.Ct. 366, 83 L.Ed. 543
Party Name:Tennessee Electric Power Co. v. Tennessee Valley Authority
Case Date:January 30, 1939
Court:United States Supreme Court

Page 118

306 U.S. 118 (1939)

59 S.Ct. 366, 83 L.Ed. 543

Tennessee Electric Power Co.

v.

Tennessee Valley Authority

No. 27

United States Supreme Court

Jan. 30, 1939

Argued November 14, 15, 1938

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES

FOR THE EASTERN DISTRICT OF TENNESSEE

Syllabus

1. The principle permitting suit against an agent of the Government to restrain execution of an unconstitutional statute protects only legal rights. P. 137.

2. Franchises to be a corporation and to function as a public utility and nonexclusive franchises to occupy and use public property and places for service of the public do not grant freedom from competition. P. 138.

3. The validity of a statutory grant of power cannot be challenged merely because its exercise results in harmful competition. The damage is damnum absque injuria. P. 139.

Page 119

4. State laws requiring electric power companies to obtain certificates of convenience and necessity as a condition to doing business do not confer upon those possessing such certificates a standing to enjoin operations of the Tennessee Valley Authority, which, though it has no such certificate, operates with consent of the State. P. 141.

5. The appellant power companies may not raise, in this case, any question of discrimination forbidden by the Fourteenth Amendment involved in state exemption of the Tennessee Valley Authority from commission regulation. Frost v. Corporation Commission, 278 U.S. 515, distinguished. P. 143.

6. The competition of the Tennessee Valley Authority in underselling the power companies and in fixing resale rates by contract does not amount to regulation of their rates in violation of the Tenth Amendment, and gives rise to no cause of action under that Amendment or under the Ninth Amendment. P. 143.

7. The findings and evidence in this case do not sustain the charge of a conspiracy between the Tennessee Valley Authority and the Public Works Administrator to intimidate the appellant power companies into selling their existing systems where the Authority desires to seize the market for electricity. P. 144.

Cooperation by two federal officials, one acting under a statute whereby funds are provided for the erection of municipal plants and the other under a statute authorizing the production of electricity and its sale to such plants, in competition with the appellants, does not spell conspiracy to injure their business. P. 146.

1 F.Supp. 947 affirmed.

Appeal from a decree of a District Court of three judges which dismissed a bill filed by numerous electric power companies wherein they sought to enjoin the Tennessee Valley Authority and its three executive officers and directors from generating, distributing, and selling electric power and from other injurious and allegedly unconstitutional activities in harmful and destructive competition with the appellants.

Page 134

ROBERTS, J., lead opinion

MR. JUSTICE ROBERTS delivered the opinion of the Court.

The Tennessee Valley Authority Act1 erects a corporation, an instrumentality of the United States, to develop by a series of dams on the Tennessee River and its tributaries a system of navigation and flood control and to sell the power created by the dams. Eighteen corporations which generate and distribute electricity in Tennessee, Kentucky, Mississippi, Alabama, Georgia, West Virginia, Virginia, North Carolina, and South Carolina, and one

Page 135

which transmits electricity in Tennessee and Alabama, filed a bill in equity, in the Chancery Court of Knox County, Tennessee, against the Authority and its three executive officers and directors. The prayers were that the defendants be restrained from generating electricity out of water power created, or to be created, pursuant to the Act and the Authority's plan of construction and operation; from transmitting, distributing, supplying or selling electricity so generated, or to be generated, in competition with any of the complainants; from constructing, or financing the construction of, steam or hydroelectric generating stations, transmission lines or means of distribution, which will duplicate or compete with any of their services; from regulating their retail rates through any contract, scheme, or device, and from substituting federal regulation for state regulation of local rates for electric service, more especially by incorporating in contracts for the sale of electricity terms fixing retail rates. The defendants removed the cause to the United States District Court for Eastern Tennessee, and there answered the bill. As required by the Act of August 24, 1937,2 a court of three judges was convened which, after a trial, dismissed the bill.3

Fourteen of the complainants are here as appellants.4 They contend that water power cannot constitutionally be created in conformity to the [59 S.Ct. 369] terms of the Tennessee Valley Authority Act, and the United States will therefore acquire no title to it, because it will not be produced as an incident of the exercise of the federal power to improve

Page 136

navigation and control floods in the navigable waters of the nation. They affirm that the statutory plan is a plain attempt, in the guise of exerting granted powers, to exercise a power not granted to the United States -- namely, the generation and sale of electric energy; that the execution of the plan contravenes the Fifth, Ninth, and Tenth Amendments of the Constitution, since the sale of electricity on the scale proposed will deprive the appellants of their property without due process of law, will result in federal regulation of the internal affairs of the states, and will deprive the people of the states of their guaranteed liberty to earn a livelihood and to acquire and use property subject only to state regulation. The appellees contest these contentions. For reasons about to be stated, we do not consider or decide the issues thus mooted.

The Authority's acts which the appellants claim give rise to a cause of action comprise (1) the sale of electric energy at wholesale to municipalities empowered by state law to maintain and operate their own distribution systems; (2) the sale of such energy at wholesale to membership corporations organized under state law to purchase and distribute electricity to their members without profit; (3) the sale of firm and secondary power at wholesale to industrial plants.

The appellants are incorporated for the purpose and with the authority to conduct business as public utilities. Several do so only within the states of their incorporation; those chartered elsewhere have qualified as foreign corporations under the laws of the states in which they manufacture, transmit, or distribute electricity. Most of them have local franchises, licenses, or easements granted by municipalities or governmental subdivisions, but it is admitted that none of these franchises confers an exclusive privilege.

Page 137

While the Authority has not built or authorized any transmission line, has not sold or authorized the sale of electricity, or contracted for, or authorized any contract for, the sale of electricity by others, in territory served by nine of the appellants, it has done some or all of these things in areas served or susceptible of service by five of the companies, and it plans to enter in the same way the territory of other appellants. It is clear, therefore, that its acts have resulted and will result in the establishment of municipal and cooperative distribution systems competing with those of some or all the appellants in territory which they now serve, or reasonably expect to serve by extension of their existing systems, and in direct competition with the appellants' enterprises through the sale of power to industries in areas now served by them or which they can serve by expansion of their facilities. The appellants assert that this competition will inflict substantial damage upon them. The appellees admit that such damage will result, but contend that it is not the basis of a cause of action, since it is damnum absque injuria, -- a damage not consequent upon the violation of any right recognized by law.

The appellants invoke the doctrine that one threatened with direct and special injury by the act of an agent of the government which, but for statutory authority for its performance, would be a violation of his legal rights may challenge the validity of the statute in a suit against the agent.5 The principle is without application unless the right invaded is a legal right -- one of property, one arising out of contract, one protected against tortious invasion, or one founded on a statute which confers a privilege.6

Page 138

The appellants urge that the Tennessee Valley Authority, by [59 S.Ct. 370] competing with them in the sale of electric energy, is destroying their property and rights without warrant, since the claimed authorization of its transactions is an unconstitutional statute. The pith of the complaint is the Authority's competition. But the appellants realize that competition between natural persons is lawful. They seek to stigmatize the Authority's present and proposed competition as "illegal" by reliance on their franchises which they say are property protected from injury or destruction by competition. They classify the franchises in question as of two sorts -- those involved in the state's grant of incorporation or of domestication and those arising from the grant by the state or its subdivisions of the privilege to use and occupy public property and public places for the service of the public.

The charters of the companies which operate in the states of their incorporation give them legal existence and power to function as public utilities. The like existence and powers of those chartered in other states have been recognized by the laws of the states in which they do business permitting the domestication of foreign corporations. The...

To continue reading

FREE SIGN UP