Ashwander v. Tennessee Valley Authority

• Decision Date: 22 February 1935
• Docket Number: No. 355.,355.
• Citation: 9 F. Supp. 965
• Parties: ASHWANDER et al. v. TENNESSEE VALLEY AUTHORITY et al.
• Court: U.S. District Court — Middle District of Alabama

9 F. Supp. 965

ASHWANDER et al. v. TENNESSEE VALLEY AUTHORITY et al.

No. 355.

District Court, N. D. Alabama, N. E. D.

February 22, 1935.

Forney Johnston, of Birmingham, Ala., for plaintiffs.

James Lawrence Fly, of Knoxville, Tenn., for Tennessee Valley Authority.

GRUBB, District Judge.

The law in this case was settled on the motion to dismiss for want of equity. 8 F. Supp. 893. I do not mean settled for good, but settled as far as this case is concerned, in the District Court. It was settled in this way: That under the Tenth Amendment, or regardless of it, the government of the United States would have no right, within the limits of a state, to conduct any private proprietary business unless it did so in a way that was tied to some express or implied constitutional grant of power. If it was tied to such a grant of power, then the power carried with it the proprietary business and the right to operate it on the part of the government in the state, and, in fact, the government has a paramount right over the state in that case. Therefore, the question that was left open was whether the government was operating a proprietary business, and whether it was attached to any specific grant of power, express or implied, under the Constitution.

Those are the questions of fact we are trying, as I understand it, on this trial. I told counsel that, while the bill contained many things, the only one that I would regard would be the validity of the contract or transaction between the Alabama Power Company, which the preferred stockholders are assailing, and the Tennessee Valley Authority; that is to say, the contract conveying the transmission lines, and making certain arrangements about the interchange of power. January 4, 1934, I believe, was its date; and also in connection with it, the contract of August 9th, which was the option to buy certain distribution systems, which was not exercised by the Tennessee Valley Authority, but which, it seems to me, throws light on their purpose in buying the transmission lines; and it seems to me clear from all the evidence, and from the nature of the transaction itself, that the Tennessee Valley Authority purchased what they did from the Alabama Power to enable it to conduct the same kind of business that the Alabama Power theretofore did with that same equipment, transmission, and so forth, i. e., the business of a utility, making and distributing electric energy. Now, its right to do that is dependent upon a showing that in the conduct of some granted constitutional power it needed this electric power, and that either there was a surplus, or that in some other way the electric power was connected with the constitutional power; so that it would have the right not only to make it, but to sell it. The attempt has been in this trial to show by the plaintiff, first, that the transaction with the Alabama Power was one that put it in the business of operating a utility business in Alabama; and, second, that there was no grant of power to which that business could be attached. And on the other hand, the defendants have controverted the first question, and, controverting the second question, they offer evidence tending to show that it was connected with either the power of navigation or with interstate commerce or the power of national defense.

There is no doubt, under my ruling on the motion, and as I see it under the law, that, if it is attached to any one of those powers, the making and selling and distributing, both wholesale and retail, of electric energy, is legal. On the other hand, if it cannot be attributed to any one of those powers, then the Tennessee Valley Authority would be in the attitude of conducting for the government, since it is a governmental instrumentality, a completely owned subsidiary of the government, a business in the state of Alabama, in a proprietary way and without any power to attach that business to; and in that case it would be an unauthorized ultra vires business and could not be conducted legally.

Now, whether the...