Kentucky Utilities Company v. Tennessee Valley Authority

• Decision Date: 15 October 1964
• Docket Number: Civ. A. No. 4861.
• Parties: KENTUCKY UTILITIES COMPANY v. TENNESSEE VALLEY AUTHORITY, Powell Valley Electric Cooperative, Edward J. Hardin, Individually and as Mayor of Tazewell, Tennessee, James B. DeBusk, Individually and as Mayor of New Tazewell, Tennessee.
• Court: U.S. District Court — Eastern District of Tennessee

237 F. Supp. 502

KENTUCKY UTILITIES COMPANY v. TENNESSEE VALLEY AUTHORITY, Powell Valley Electric Cooperative, Edward J. Hardin, Individually and as Mayor of Tazewell, Tennessee, James B. DeBusk, Individually and as Mayor of New Tazewell, Tennessee.

Civ. A. No. 4861.

United States District Court E. D. Tennessee, N. D.

October 15, 1964.

Malcolm Y. Marshall, James S. Welch, Ogden, Robertson & Marshall, Louisville, Ky., John A. Rowntree, Claude K. Robertson, Fowler, Rowntree & Fowler, Knoxville, Tenn., James D. Estep, Jr., Tazewell, Tenn., for plaintiff.

William R. Stanifer, Tazewell, Tenn., Philip P. Ardery, Louisville, Ky., Clyde Y. Cridlin, Jonesville, Va., Charles J. McCarthy, Tennessee Valley Authority, Knoxville, Tenn., for defendants.

ROBERT L. TAYLOR, Chief Judge.

Plaintiff, Kentucky Utilities Company, hereafter referred to as KU, seeks injunctive relief against defendants, Tennessee Valley Authority, hereafter referred to as TVA, Powell Valley Electric Cooperative, hereafter referred to as Powell Valley, Edward J. Hardin, Individually and as Mayor of Tazewell, Tennessee, and James B. DeBusk, Individually and as Mayor of New Tazewell, Tennessee, to prevent them from taking or attempting to take its electric customers in the area of Tazewell and New Tazewell, Claiborne County, Tennessee, and also a judgment for damages for loss of business resulting from defendants' alleged wrongful acts.

Jurisdiction is based on 28 U.S.C. §§ 1331, 1332, 2201 and 2202.

The action against Mayors Hardin and DeBusk in their individual capacity was withdrawn during the trial.

KU seeks to enjoin TVA from selling or delivering electric power to Powell Valley, a distributor of TVA power, and enjoin Powell Valley from purchasing or receiving from TVA electric power for resale in either of the municipalities of Tazewell, Tennessee or New Tazewell, Tennessee, other than to customers and locations receiving electric service from Powell Valley on October 30, 1963. Relief is also sought against the Mayors of the two towns in their official capacities to prevent them from interfering with KU customer contracts.

Plaintiff contends that commencing in 1961 or 1962 and continuing to the present time, all of the defendants have combined and conspired and acted together to appropriate to themselves all of the electric utility customers, business, revenues and contracts of KU for electric service within the two Tazewells, and that several dozen customers have been lost by KU as a result of the conspiracy.

The claimed overt acts consist of numerous meetings held by the representatives of defendants whereby plans were devised and carried out through acts commencing October 30, 1963 to take all of the business of KU in the two municipalities.

Plaintiff further contends that the TVA in furnishing electric power and in agreeing to furnish electric power to Powell Valley, which sells to the two municipalities and which has agreed to sell at retail to customers located in the corporate limits of the municipalities, violated 16 U.S.C. § 831n-4 (hereafter called the 1959 TVA Act), which provides in pertinent part as follows:

"* * * Unless otherwise specifically authorized by Act of Congress the Corporation shall make no contracts for the sale or delivery of power which would have the effect of making the Corporation or its distributors, directly or indirectly, a source of power supply outside the area for which the Corporation or its distributors were the primary source of power supply on July 1, 1957, and such additional area extending not more than five miles around the periphery of such area as may be necessary to care for the growth of the Corporation and its distributors within said area: Provided, however, That such additional area shall not in any event increase by more than 2½ per centum (or two thousand square miles, whichever is the lesser) the area for which the Corporation and its distributors were the primary source of power supply on July 1, 1957: And provided further, That no part of such additional area may be in a State not now served by the Corporation or its distributors or in a municipality receiving electric service from another source on or after July 1, 1957, and no more than five hundred square miles of such additional area may be in any one State now served by the Corporation or its distributors.

"Nothing in this subsection shall prevent the Corporation or its distributors from supplying electric power to any customer within any area in which the Corporation or its distributors had generally established electric service on July 1, 1957, and to which electric service was not being supplied from any other source on the effective date of this Act."

The Act became effective August 6, 1959. It is to be noted that thereunder the TVA, except for specified exceptions, was not to contract for the supply of power "outside the area for which the Corporation or its distributors were the primary source of power supply on July 1, 1957."

KU insists that TVA was not the primary source of power supply in the areas of the two municipalities on July 1, 1957 within the meaning of the Act but that the municipalities were receiving electric service from KU on that date and on the date the Act became effective.

KU further contends that there was a common law conspiracy of the defendants to interfere with the contractual relations between it and its customers in the two municipalities by inducing such customers to terminate their contracts with KU in violation of the 1959 TVA Act.

TVA contends that plaintiff has no standing to maintain the action as the complaint presents no justiciable controversy. That KU does not have an exclusive franchise to furnish electric service in the municipalities and has no common law or statutory right to be free from competition of TVA and its distributors. That the 1959 TVA Act does not expressly confer upon KU the right to maintain an action based upon alleged violations of the Act by TVA and, in the absence of such provision KU is without standing to bring the action.

TVA contends further that the findings of its Board that the two municipalities are within the TVA service area is not subject to judicial review if the finding was made in good faith and supported by substantial evidence and that the Board's action met these requirements.

TVA also contends that it has made no contract since the effective date of the Act which would have the effect of changing the relationship of TVA or its distributors with respect to the source of power supply in the two municipalities.

TVA says that it and its distributors were the primary source of power supply in the two Tazewells on July 1, 1957 within the meaning of the 1959 TVA Act.

TVA denies that it unlawfully induced or combined to induce customers of KU to terminate, breach or sever alleged contracts with KU for electric service.

TVA asserts that the citizens of Tazewell and New Tazewell, Tennessee have a right to obtain electric service from whomever they please and that KU has no right to be free from lawful competition.

The two Mayors, and the municipalities which they represent, adopted the contentions made by TVA and in addition they contend that KU is serving customers in the area of the municipalities at the sufferance of the municipalities as KU has neither an exclusive franchise nor any franchise to serve the municipalities. They assert that the municipalities have the right under the Tennessee law to establish their own electric systems and that the citizens acting through their elected officers have the right to choose between the TVA current and the current furnished by private institutions.

The defenses of Powell Valley to the complaint are the same as the other defendants insofar as applicable.

Standing of Plaintiff to Maintain Action

If plaintiff has proved the charges of common law conspiracy and a violation of the 1959 TVA Act and has sustained injuries therefrom, it has standing to maintain the suit. National Bank of Detroit v. Wayne Oakland Bank, 252 F.2d 537, cert. denied, 358 U.S. 830, 79 S.Ct. 50, 3 L.Ed.2d 69 (C.A. 6); Whitney National Bank in Jefferson Parish v. Bank of New Orleans & Trust Co., (Cir.), 116 U.S.App.D.C. 285, 323 F.2d 290, cert. granted, 376 U.S. 948, 84 S.Ct. 967, 11 L.Ed.2d 969; Commercial State Bank of Roseville v. Gidney, D.C., 174 F.Supp. 770, affirmed, 108 U.S.App.D.C. 37, 278 F.2d 871.

The cases cited by TVA of Alabama Power Company v. Ickes, 302 U.S. 464, 58 S.Ct. 300, 82 L.Ed. 374, Tennessee Electric Power Company v. Tennessee Valley Authority, 306 U.S. 118, 59 S.Ct. 366, 83 L.Ed. 543 and Kansas City Power & Light Company v. McKay, 96 U.S.App. D.C. 273, 225 F.2d 924 are distinguishable from the case under consideration. Each of these cases involved a suit by a private utility to enjoin officers or agencies of the United States from making contracts which would have the effect of increasing competition between the private retailer and the public power agencies. The public power agencies' competition was legal in itself, but was attacked on the basis that either the statutes authorizing the activities of the various officers and agencies were unconstitutional or that the officers and agencies had exceeded their authority under the Act. In each case, it was held that the competition complained of was in itself not prohibited by statute or the terms of an exclusive franchise; hence, no common law or statutory rights of the plaintiffs had been invaded. The plaintiffs, therefore, had no standing to question the authority of the various officers and agencies of the United States.

In Alabama Power Company v. Ickes, supra, the Court likened the position of the plaintiffs to that of a taxpayer suing to enjoin the expenditures of federal funds, which could not be done under the decision of Commonwealth of Massachusetts v. Mellon, 262 U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078. The distinction in these cases is...