Fairbanks, Morse & Co. v. Texas Electric Service Co.

• Decision Date: 25 February 1933
• Docket Number: No. 6595.,6595.
• Citation: 63 F.2d 702
• Parties: FAIRBANKS, MORSE & CO. v. TEXAS ELECTRIC SERVICE CO.
• Court: U.S. Court of Appeals — Fifth Circuit

63 F.2d 702 (1933)

FAIRBANKS, MORSE & CO. v. TEXAS ELECTRIC SERVICE CO.^*

No. 6595.

Circuit Court of Appeals, Fifth Circuit.

February 25, 1933.

Allen Wight, of Dallas, Tex., for appellant.

R. K. Hanger, of Fort Worth, Tex., Charles L. Black, of Austin, Tex., and Joe A. Worsham, of Dallas, Tex., for appellee.

Before BRYAN, SIBLEY, and HUTCHESON, Circuit Judges.

HUTCHESON, Circuit Judge.

From a decree granting an omnibus injunction as to the sixty-five communities in Texas which plaintiff, a public utility, serves, restraining the defendant from inducing or causing others to induce breaches of the contracts which plaintiff has, since this cause was here before, 32 F.(2d) 696, obtained from its customers, defendant appeals.

The suit as originally brought represented a step in the struggle which then focused in the towns of Seymour and Commerce, had been for some time going on, in which defendant, in the interest of selling its machinery, was trying to institute effective municipal competition in those communities, and plaintiff, in the interest of maintaining the monopoly it had, was trying to prevent it.

On the former appeals, Fairbanks, Morse & Co. v. Texas Power & Light Co. (C. C. A.) 32 F.(2d) 693 and Id., (C. C. A.) 32 F.(2d) 696, we affirmed the undoubted right of cities and towns to build municipal plants, and of defendant to freely contract with and sell to them, and denied plaintiff's right to in any manner prevent such dealings. Cf. West Texas Utilities Co. v. City of Spur (C. C. A.) 38 F.(2d) 466, 469. Of the contracts with its customers which plaintiff then claimed protection for, we said that, since it appeared from the record that they were about to expire, it did not appear that defendant, in preparing to solicit them for the city plants, was infringing plaintiff's rights.

The bill on which this injunction was granted was filed over the objection of defendant that it stated a new cause of action, as an amendment to the former petition for the purpose of declaring on the long-time contracts it had gone about to secure after this court had held that, because no substantial contract rights were shown on the old bill, no ground for injunction existed. This amendment set up that plaintiff has obtained written requirement contracts of from two to five years' duration from 90 per cent. of the users of electricity in every community it serves; that defendant knows this to be so, but, notwithstanding, it is now engaged in carrying on a plan to sell on credit to and install in those communities municipal light and power plants, the necessary purpose and effect of which plan, because of plaintiff's contracts with practically all of the users there, is to induce plaintiffs customers to breach their contracts with it in order to become contract customers of the municipal plants to be erected by defendant; that particularly is this so because defendant, looking under its agreement entirely to the revenues of the plant for its pay, must have assurances before it agrees to build, that at least 70 per cent. of the electric users in the community will make exclusive three-year contracts with the municipal plant.

The defendant, denying that it ever did request or would request cities and towns to induce persons to breach their contracts with plaintiff, admits that its plan of selling is substantially as alleged, that is, it sells on credit agreeing to take its pay out of the revenues of the plant, and that, for the purpose of assuring itself that it may reasonably expect its outlays to be returned from those revenues, it does require a customer canvass to be made and assurances to be given of the business which the plant, if erected, may expect to have. It admits that it does endeavor to make thorough surveys of the different communities to determine the markets there for the sale of municipal light and power plants, and whether it can safely erect plants. It admits also that it intends to continue to follow the same plan of business in future, and in the course of it to insist upon having each town which it proposes to contract with obtain evidence by circulating exclusive contracts, among the users of electricity there or otherwise, that enough permanent customers may be secured to make the plant a success. No proof was offered showing or tending to show that the breach of a single one of the contracts on which plaintiff now relies has been caused by defendant or by its procurement, or that it has set on foot or caused others to set on foot solicitations to breach them. It is, however, shown that plaintiff has contracts with upwards of 90 per cent. of the users of electricity in the communities it serves, thus giving it, if its customers cannot be solicited, a practical monopoly of the business, with the result that, since defendant's plan requires towns with which it contracts to furnish assurances of patronage from at least 70 per cent. of such users, it follows that no municipal plant can exist or operate unless some at least of plaintiff's customers can be induced to breach.

The proof also shows (whether on plaintiff's or defendant's initiative is not clear) that negotiations were on foot between Carpenter, plaintiff's president, and Bolton, defendant's manager, looking to suppressing and doing away with the competition which defendant's activities in pressing for municipal business was forcing on plaintiff. In these negotiations it was stated that plaintiff had taken away so much of defendant's regular business by distributing power to gins, waterworks, etc., that defendant would be compelled to press its case to get municipal business, and that, unless plaintiff would make purchases to the amount of several hundred thousand dollars, the competition would continue. It was proven that these efforts of defendant to set up municipal plants in competition was causing bad feeling and resulting in injury and damage to plaintiff.

The contracts attached to plaintiff's bill and offered in evidence are on their face merely applications for service in which the applicant, without agreeing to take any particular amount, agrees to pay the company for the service which it furnishes. These applications do not on their face or by the agreement printed on the reverse, bind domestic customers to take any particular amount of current, or the company to furnish them any particular amount. The power customers are, however, bound by the agreement they sign to take for the period of the contract the extent of their full requirement of power. These contracts provide as to both domestic and power customers, that the customer will not resell to any person any part of the energy furnished him under the contract.

Defendant offered no evidence. The court found that the plaintiff's contracts were valid, that the actions of the defendant were intended to cause and would cause their breach, and that plaintiff was entitled to an injunction, qualified, however, so as not to restrain defendant from trying to sell its plants, or from going to domestic users to induce them to take contracts, if after inquiry it was found that they had no contracts with plaintiff. The injunction was in effect that defendant be enjoined from inducing the customers of plaintiff with whom it has contracts that had not terminated, to breach them, and from soliciting or causing others to solicit, by requests or in contracts or agreements, contract customers of plaintiff to sign new contracts...