Tampa Electric Company v. Nashville Coal Company

Citation276 F.2d 766
Decision Date04 April 1960
Docket NumberNo. 13775.,13775.
PartiesTAMPA ELECTRIC COMPANY, Appellant, v. NASHVILLE COAL COMPANY, Nashville Coal, Inc., and West Kentucky Coal Company, Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)


William C. Chanler, New York City, (Winthrop, Stimson, Putnam & Roberts, New York City, David M. Keeble of Hooker, Keeble, Dodson & Harris, Nashville, Tenn., on the brief; Edwin J. Wesely, Stephen A. Weiner, New York City, of counsel), for appellant.

Abe Fortas, Washington, D. C. (Norman Diamond of Arnold, Fortas & Porter, Washington, D. C., Cecil Sims of Bass, Berry & Sims, Nashville, Tenn., on the brief), for appellee.

Before MILLER, CECIL and WEICK,* Circuit Judges.


The appellant, Tampa Electric Company, brought this declaratory judgment action in the District Court, pursuant to Sec. 2201, Title 28 U.S.C., for the purpose of having its contract of May 23, 1955, providing for the purchase of coal by it from the appellees, declared valid and enforceable. The appellees contended that the contract was illegal and unenforceable by or against either of the contracting parties, in that it was contrary to Sections 1 and 2 of the Sherman Act and Section 3 of the Clayton Act, Sections 1, 2 and 14, Title 15 U.S.C.A. The facts not being in dispute, both the appellant and the appellees moved for summary judgment. The District Judge held that the contract was in violation of Section 3 of the Clayton Act, was therefore illegal and unenforceable, and that the appellant was entitled to no relief against any of the appellees on account of their refusal to perform under the contract. Tampa Electric Co. v. Nashville Coal Co., D.C. M.D.Tenn., 168 F.Supp. 456. This appeal followed.

Appellant is an electric public utility serving the city of Tampa, Florida, and neighboring communities. The appellees are engaged in mining and selling coal.

In 1954 appellant operated two integrated generating plants, both located on Tampa Bay, Florida, at which there were eleven generating units, all of which burned oil. In that year, in order to meet the increasing demand for electric energy in its service area, appellant decided to expand its facilities and build a new and additional integrated generating station on Tampa Bay, to be known as the Francis J. Gannon Station, at which it was planned to ultimately install six generating units.

The May 23, 1955, contract was for the purchase of coal for use at the Gannon Station. It was entered into between the appellant as the buyer and the Potter Towing Company, a Tennessee partnership of David K. Wilson and Justin Potter, as the seller. Subsequent to the making of the contract, the interest of Wilson and Potter was transferred to the appellee Nashville Coal Co. and thereafter to the appellee Nashville Coal, Inc., which is a wholly owned subsidiary of the appellee West Kentucky Coal Company. The West Kentucky Coal Company guaranteed the appellant in writing against any loss or damage arising out of nonperformance of the contract.

The contract, after stating that the seller proposed to make available for sale to the buyer large quantities of coal from the West Kentucky field near Uniontown, Kentucky, and that the buyer desired to purchase certain coal for its use in its plant to be constructed near Tampa, upon the terms and conditions thereinafter set out, provided as follows:

"Seller agrees to provide and deliver on the dock or docks of the Buyer at Plant Gannon coal to supply the total requirements of fuel of the Buyer for the operation of its first two units to be installed at the Gannon Station and the Buyer agrees to accept and pay for such fuel as provided in Article 4 hereof, which fuel requirements shall be not less than 225,000 tons of coal per unit per year. It is further agreed that if during the first 10 years of the term of this contract the Buyer constructs additional units in which coal is used as the fuel, it shall give the Seller notice thereof two years prior to the completion of such unit or units and upon completion of same the fuel requirements thereof shall be added to this contract and be furnished by the Seller and accepted by the Buyer. It is understood that the Buyer has the option to be exercised two years prior to completion of said unit or units of determining whether coal or some other fuel shall be used in same. It is anticipated that deliveries will start approximately March, 1957 for the requirements of the first unit and that deliveries for the requirements of Unit #2 will begin when constructed."

It also provided,

"The term of this agreement shall be for a period of twenty years from the first day of the month in which month first deliveries are made to the Buyer."

The first unit of the Gannon plant commenced operation August 1, 1957; the second unit on October 29, 1958. The third unit, a coal burning unit, was under construction at the time this action was filed.

For the appellant to equip the Gannon Station to burn coal necessitated a capital expenditure of $3,000,000.00 more than if the fuel initially chosen had been oil. To supply the appellant under this contract required a capital expenditure in excess of $7,500,000.00 by the appellees.

In April, 1957, just before the first coal was to be delivered under the contract, the appellees advised appellant that they would not perform under the contract, which they contended was illegal and unenforceable by either party. As a result, it has been necessary for appellant to purchase its coal requirements in the market at a price substantially higher than that provided for in the contract.

In making such arrangements it estimated that its coal requirements for its Gannon Station were approximately as follows:

                  Year 1958 ...........    350,000 tons
                  Year 1959 ...........    700,000 tons
                  Year 1960 ...........    700,000 tons
                  Year 1961 ...........  1,000,000 tons

"To increase as required to about 2,250,000 tons per year."

At the time the contract was entered into, coal accounted for less than 6% of the fuel consumed in the entire state of Florida. Every electric generating installation in peninsular Florida burned oil at that time. It was estimated by the buyer that within a very few years the Gannon Station would consume more coal than was presently consumed in the entire state of Florida. Peninsular Florida's coal consumption was approximately 700,000 tons per year.

Section 3 of the Clayton Act provides as follows:

"It shall be unlawful for any person engaged in commerce, in the course of such commerce, to * * * contract for sale of goods, * * *, supplies, or other commodities, whether patented or unpatented, for use, consumption, or resale within the United States * * *, on the condition, agreement, or understanding that the * * * purchaser thereof shall not use or deal in the goods, * * *, supplies, or other commodities of a competitor or competitors of the * * * seller, where the effect of such * * * contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce."

Appellant's initial contention is that the statutory history of Section 3 shows that the Act was not intended to apply to consumers; that it was intended solely for the purpose of protecting dealers and retailers from certain specific practices whereby powerful sellers, through some form of economic leverage, frequently required them to execute agreements not to deal in a competitor's goods as a condition to the purchase of the seller's goods; and that Congress never contemplated that the Act should prevent a consumer from contracting for the purchase of his requirements of a single commodity, even though the amount was very substantial. In other words, Congress was concerned only with attempts by sellers, who were economically powerful, to restrain competition in the distributive process. The statutory language is not so restrictive. It expressly refers to "a" contract for sale "for use, consumption or resale." (Emphasis added.) The wording clearly includes a single sales contract for use or consumption, as well as multiple sales by sellers to numerous dealers or retailers for resale. There is nothing ambiguous about this language of the statute. Under such circumstances, we do not look to the legislative history of the Act in order to give it a different construction. In Standard Fashion Co. v. Magrane-Houston Co., 258 U.S. 346, 42 S.Ct. 360, 362, 66 L.Ed. 653, the Court had under consideration the construction of Section 3 of the Clayton Act. The Court said, "Much is said in the briefs concerning the reports of committees concerned with the enactment of this legislation, but the words of the act are plain and their meaning is apparent, without the necessity of resorting to the extraneous statements and often unsatisfactory aid of such reports." To the same effect is Anchor Serum Co. v. Federal Trade Commission, 7 Cir., 217 F.2d 867, 870; George Van Camp & Sons v. American Can Co., 278 U.S. 245, 253-254, 49 S.Ct. 112, 73 L.Ed. 311. See also: Ohio Power Co. v. N. L. R. B., 6 Cir., 176 F.2d 385, 387, 11 A.L.R.2d 243, certiorari denied 338 U.S. 899, 70 S.Ct. 249, 94 L.Ed. 553; Mid-Continent Petroleum Corp. v. N. L. R. B., 6 Cir., 204 F.2d 613, 623, certiorari denied, 346 U.S. 856, 74 S.Ct. 71, 98 L.Ed. 369.

The statute condemns certain transactions, the effect of which may be to substantially lessen competition or tend to create a monopoly in any line of commerce. A single contract of sale of sufficient magnitude, with performance extending over an extended period of time, can cause this result. If it does have this result and is otherwise included within the plain wording of the statute, the statute must be construed in accordance with the Congressional purpose. Securities & Exchange Commission v. C. M. Joiner Leasing Corp., 320 U.S. 344, 350-351, 64...

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