Arkansas-Missouri Power Corp. v. City of Kennett, Mo.

• Decision Date: 31 July 1940
• Docket Number: No. 11688.,11688.
• Citation: 113 F.2d 595
• Parties: ARKANSAS-MISSOURI POWER CORPORATION v. CITY OF KENNETT, MO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

113 F.2d 595 (1940)

ARKANSAS-MISSOURI POWER CORPORATION v. CITY OF KENNETT, MO. et al.

No. 11688.

Circuit Court of Appeals, Eighth Circuit.

July 9, 1940.

Rehearing Denied July 31, 1940.

Langdon R. Jones, of Kennett, Mo., and D. C. Chastain, of Butler, Mo. (A. Z. Patterson, of Kansas City, Mo., on the brief), for appellant.

Arthur U. Goodman, Jr., of Kennett, Mo., and Robert B. Fizzell, of Kansas City, Mo. (Poppenhusen, Johnston, Thompson & Raymond, of Chicago, Ill., and Bowersock, Fizzell & Rhodes, of Kansas City, Mo., on on the brief), for appellees.

Before GARDNER and SANBORN, Circuit Judges, and COLLET, District Judge.

COLLET, District Judge.

The Arkansas-Missouri Power Company, referred to hereafter as the plaintiff, an Arkansas corporation, seeks to enjoin the City of Kennett, Missouri, and others from carrying out contracts for the construction of a competing municipal electric power and light plant in and for that City upon the ground that those contracts contain provisions violating certain prohibitions of the Constitution and laws of Missouri. From a judgment dismissing its bill plaintiff appeals.

Plaintiff has for a number of years been engaged in the sale and distribution of electricity within the City of Kennett, Missouri. Until 1935 plaintiff's business was carried on under authority of a franchise from the City. That franchise expired in 1935. In August, 1933, the voters of the City of Kennett authorized the issuance of $140,000 of bonds for the purpose of constructing a municipal electric plant. The City has entered into a contract with the Federal Emergency Board of Public Works by the terms of which that Board, hereafter referred to as P. W. A., is to purchase approximately $114,000 of the City's bonds and make a grant to the City of an additional amount not exceeding $40,000, both to be used for the construction of the proposed municipal electric plant. The contract also contained provisions by which the City agreed to require any contractor erecting or constructing the proposed plant to observe certain fixed minimum wage scales for labor performed in its construction. The City has also entered into contracts with the defendant Fairbanks-Morse & Company and others for the construction of the municipal plant. Those contracts carry into effect the minimum wage scale provided for in the P. W. A. contract. It is charged that these wage scales are substantially higher than wages customarily paid in that community and hence the payment of the City's funds for labor at the rates therein fixed will amount in part to a gift of the City's funds to private individuals in violation of the Missouri Constitution, Article IV, Section 47, Mo.St.Ann., prohibiting the making of such grants or gifts of public funds.¹ Plaintiff's bill further charges that since the contract between the City and P. W. A. is unlawful for the reason stated the City is about to engage in competition with plaintiff by unlawful means, from which plaintiff contends it has the right to protection by injunction. This action seeks to enjoin the carrying out of the contract with P. W. A. and the related construction contracts. The trial court, after full hearing and the finding, among others, of the fact that plaintiff was operating without a franchise, dismissed the bill for want of a showing that the jurisdictional amount was in controversy. While that question may not be free from doubt, since upon the admitted facts the bill must be dismissed for want of equity, we will assume the existence of jurisdiction.

The rule has frequently been announced that a utility operating with authority within a municipality may obtain injunctive relief from unlawful competition and consequent injury to its business.² But here plaintiff is operating without a franchise. Its status has, under such circumstances, been characterized by the Missouri Supreme Court as illegal.³ Plaintiff asserts no rights as a taxpayer. The question, therefore, is: What right has a utility operating illegally, or at most by sufferance,⁴ to question the legality of another's competitive operation?

The City asserts that even if plaintiff had a valid franchise it could not question the legality of the contracts which create the threatened competition. The cases cited in support of that contention do not directly determine that contention. Those cases⁵ insofar as applicable here, hold in effect that although complainants possessed the legal authority to operate, yet the competition complained of was lawful competition, the existence of which furnished complainants no basis for complaint or relief, and therefore the alleged unlawfulness of the act of the Government which furnished the means by which the competition was brought about was of no justiciable importance to complainants. But in the case at bar plaintiff is charging that the City, not the Federal Government, is committing an unlawful act, and it is from the act of the City that plaintiff seeks protection, and not from the act of the Government or others as was the situation in Alabama Power Co. v. Ickes and Duke Power Co. v. Greenwood County, above referred to.

That in order to justify injunctive relief from unlawful competition the unlawful act charged must be so closely related to the competition as to poison the competition with illegality to such an extent that the competition otherwise lawful becomes unlawful, is clearly stated in Missouri Public Service...