United States v. City and County of San Francisco

• Decision Date: 22 April 1940
• Docket Number: No. 587,587
• Parties: UNITED STATES v. CITY AND COUNTY OF SAN FRANCISCO
• Court: U.S. Supreme Court

310 U.S. 16

60 S.Ct. 749

84 L.Ed. 1050

UNITED STATES

v CITY AND COUNTY OF SAN FRANCISCO.

No. 587.

Argued March 28, 1940.

Decided April 22, 1940.

Rehearing Denied May 20, 1940.

See 310 U.S. 657, 60 S.Ct. 1071, 84 L.Ed. —-.

Messrs. Robert H. Jackson, Atty. Gen., and Norman W. Littell, Asst. Atty. Gen., for petitioner.

Messrs. Garret W. McEnerney and John J. O'Toole, both of San Francisco, Cal., for respondent.

[Argument of Counsel from page 17 intentionally omitted] Mr. Justice BLACK delivered the opinion of the Court.

By the Raker Act of December 19, 1913,¹ Congress granted the City and County of San Francisco,² subject to express conditions, certain lands and rights-of-way in the public domain in Yosemite National Park and Stanislaus National Forest. The Act in terms declared that this, known as the 'Hetch-Hetchy' grant, was intended for use by the City both in constructing and maintaining a means of supplying water for the domestic purposes of the City and other public bodies, and in establishing a system 'for generation and sale and distribution of electric energy.'

Upon application of the Secretary of the Interior, the United States brought this suit³ in equity charging the city with disposing of power through the Pacific Gas & Electric Company, a private utility, in violation of Section 6 of the granting Act. Section 6 provides 'That the grantee (the City) is prohibited from ever selling or letting to any corporation or individual, except a municipality or a municipal water district or irrigation district, the right to sell or sublet the water or the electric energy sold or given to it or him by the said grantee: Provided, That the rights hereby granted shall not be sold assigned, or transferred to any private person, corporation, or association, and in case of any attempt to so sell, assign, transfer, or convey, this grant shall revert to the Government of the United States.'

The District Court concluded that the City was violating Section 6 by the sale and distribution of Hetch-Hetchy power through the Pacific Gas & Electric Company, a private utility. Accordingly, the City was required by injunction alternatively to discontinue such disposal of the power or cease further use of the lands and rights granted it under the Act for generation and transmission of electric energy.⁴ The Circuit Court of Appeals reversed,⁵ finding that the private utility was merely acting as the City's agent in the sale and distribution of Hetch-Hetchy power and holding that Section 6 does not prohibit such sale and distribution of that power by private utility.

Here, as in the courts below, the City has defended the sale and distribution by the Pacific Gas & Electric Company of power originating at Hetch-Hetchy upon the grounds that such disposition does not violate the prohibitions of Section 6; that imposition of these prohibitions was not within the constitutional authority of Congress; and that if Section 6 is valid and has been violated, the United States is not entitled to injunctive relief in equity.

First. Prohibitions of Section 6. In the City's view, Section 6 does not preclude private utilities from all participation in the ultimate sale and distribution of Hetch-Hetchy power. The City insists that the Section, so construed, does no more than prohibit the City from selling Hetch-Hetchy power to a private utility for resale to consumers and therefore permits consignment of the power to the Company, as agent of the City, for sale and distribution. On the contrary, the Government's position rests upon the claim that Pacific Gas & Electric Company is not in reality selling and distributing Hetch-Hetchy power as consignee and agent but as purchaser for resale; that the grant to the City was made upon the mandatory condition that this power be sold solely and exclusively by the City directly to consumers and without private profit in order to bring it into direct competition with adjacent privately owned utilities; and that Section 6 not only withholds the right of selling for resale but also prohibits the City 'from ever selling or letting' to any private corporation 'the right to sell or sublet the * * * electric energy sold or given to it * * *' by the City. The language of the Act, its background and its history require the construction given Section 6 by the Government.

From its provisions,⁶ it is apparent that the Act conditions the grant upon and contemplates the development, sale and distribution of electrical power by the City itself 'for municipal and commercial use' on a scale to be gradually stepped up over a period of years. 'The * * * grantee shall develop and use hydroelectric power for the use of its people and shall * * * sell or supply such power for irrigation, pumping, or other beneficial use.' The 'right to sell or sublet the * * * electric energy' so generated by the City cannot, as a consequence of Section 6, be sold or let. And in case of any attempt to 'sell, assign, transfer, or convey (the rights granted), this grant shall revert to the Government of the United States.'

From the statement of the Congressman responsible for the application of the prohibitions of Section 6 specifically to electric energy,⁷ it is clear that as enacted Section 6 was understood to prohibit the City from transferring to a private utility the right to sell Hetch-Hetchy power (the Government's contention) and not merely to forbid sale of power as a commodity for resale as the City would have us hold:

'Mr. Taylor of Colorado. We have got to let the municipality sell to individuals or consumers.

'Mr. Thomson of Illinois. Yes; but not the right to sell some one else the power.

'Mr. Taylor of Colorado. Supposing that San Francisco sells a certain block, you may say, of its power to Alameda. Has not Alameda got the right to resell that to its inhabitants?

'Mr. Thomson of Illinois. Mr. Chairman, in answering the question of the gentleman from Colorado, I would like to call his attention to the fact that the subject of sale as printed in this section is not the power or the water, but the right to sell the power or the water.

'* * *

'Mr. Raker. That (the word 'individual') really is intended to cover any person who might attempt to buy this electric power or right. I think it would cover everybody outside of a corporation, the intention being to prevent anybody getting in and getting a right and sub-letting it.'⁸

In its Report on the Bill, the House Committee on Public Lands stated that the provision of Section 6 'acquiesced in by the grantee, was designed to prevent any monopoly or private corporation from hereafter obtaining control of the water supply of San Francisco.'⁹

From the congressional debates on the passage of the Raker Act can be read a common understanding both on the part of sponsors of the Bill and its opponents that the grant was to be so conditioned as to require municipal performance of the function of supplying Hetch-Hetchy water and electric power directly to the ultimate consumers, and to prohibit sale or distribution of that power and water by any private corporation or individual.¹⁰ On the floor of the House, the following took place between the Bill's author and other Representatives:

'Mr. Sumners. Does San Francisco own its own lighting plant now?

'Mr. Kahn. No; it does not.

'Mr. Raker. I understand it does not.

'Mr. Kahn. It does not own its own water supply. Its present water supply is furnished by a private company.

'Mr. Raker. The Spring Valley Water System.

'Mr. Sumners. Is it the purpose of this bill to have San Francisco supply electric power and water to its own people?

'Mr. Raker. Yes.

'Mr. Sumners. Or to supply these corporations, which will in turn supply the people?

'Mr. Raker. Under this bill it is to supply its own inhabitants first. * * *'¹¹

These views were in accord with the recommendation of the then Secretary of the Interior, as set out in the Report of the Public Lands Committee of the House:

'I think that it is very proper that the Federal Government should use whatever power it has over the public lands, over the parks, and over the forests, to compel the fullest use of these waters, and indirectly to require through its power to make conditions, the lowest possible rate for consumers.' ¹²

The theme—of an intent to require public utilization of Hetch-Hetchy power independently of private utilities—recurred at a later stage of the debate in the House:

'Mr. Gray. * * *

'As I understand the bill, it provides for the furnishing of water, and also for power for commercial use. * * *

'* * * if these words here are to be constructed to serve the baseness of commercialism, it is the vilest of all vandalism. My suggestion here to you is to strike out of this bill all the commercial profit. * * *

'Mr. Kent. (a Member of the California delegation and a supporter of the measure) Mr. Chairman, I should like to suggest to the gentleman from Indiana (Mr. Gray) that this bill is strictly drawn in the public interest, that there is no possibility of selfish gain, and that no corporation or individual can obtain any benefit whatsoever from this bill. It is for the benefit of the people of California.'¹³

In the Senate, Senator Thomas, a Member of the Committee reporting the Bill, said:

'* * * San Francisco needs electric power, and California needs development in electric power just as much as she needs ownership in water, * * * '* * * She is anxious to extend her spheres of municipal usefulness, but she is in the grip of a power monopoly as well as that of the Spring Valley Co.

'* * * This scheme appeals to me, Mr. President, so far as the power is concerned, because the city of San Francisco as a municipality will be the owner of it, the manufacturer, the distributer of it.'¹⁴

And the words of Senator Norris, also a Member of the reporting Committee and a leading sponsor of the bill, on the day of its final passage through the Senate, illuminate...