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RSSU.S. Supreme Court TENNESSEE ELEC. POWER CO. v. TENNESSEE VAL. AUTHORITY, 306 U.S. 118 (1939)
[Page 306 U.S. 118, 135] which transmits electricity in Tennessee and Alabama, filed a bill in equity, in the Chancery Court of Knox County, Tennessee, against the Authority and its three executive officers and directors. The prayers were that the defendants be restrained from generating electricity out of water power created, or to be created, pursuant to the Act and the Authority's plan of construction and operation; from transmitting, distributing, supplying or selling electricity so generated, or to be generated, in competition with any of the complainants; from constructing, or financing the construction of, steam or hydro-electric generating stations, transmission lines or means of distribution, which will duplicate or compete with any of their services; from regulating their retail rates through any contract, scheme or device; and from substituting federal regulation for state regulation of local rates for electric service, more especially by incorporating in contracts for the sale of electricity terms fixing retail rates. The defendants removed the cause to the United States District Court for Eastern Tennessee and there answered the bill. As required by the Act of August 24, 1937,2 a court of three judges was convened which, after a trial, dismissed the bill. [Footnote 3] Fourteen of the complainants are here as appellants. [Footnote 4] They contend that water power cannot constitutionally be created in conformity to the terms of the Tennessee Valley Authority Act, and the United States will, therefore, acquire no title to it, because it will not be produced as an incident of the exercise of the federal power to im- [Page 306 U.S. 118, 137] While the Authority has not built or authorized any transmission line, has not sold or authorized the sale of electricity, or contracted for, or authorized any contract for, the sale of electricity by others, in territory served by nine of the appellants, it has done some or all of these things in areas served or susceptible of service by five of the companies; and it plans to enter in the same way the territory of other appellants. It is, clear, therefore, that its acts have resulted and will result in the establishment of municipal and cooperative distribution systems competing with those of some or all the appellants in territory which they now serve, or reasonably expect to serve by extension of their existing systems, and in direct competition with the appellants' enterprises through the sale of power to industries in areas now served by them or which they can serve by expansion of their facilities. The appellants assert that this competition will inflict substantial damage upon them. The appellees admit that such damage will result, but contend that it is not the basis of a cause of action since it is damnum absque injuria,-a damage not consequent upon the violation of any right recognized by law. The appellants invoke the doctrine that one threatened with direct and special injury by the act of an agent of the government which, but for statutory authority for its performance, would be a violation of his legal rights, may challenge the validity of the statute in a suit against the agent. [Footnote 5] The principle is without application unless the right invaded is a legal right,-one of property, one arising out of contract, one protected against tortious invasion, or one founded on a statute which confers a priv- [Page 306 U.S. 118, 138] ilege. [Footnote 6] The appellants urge that the Tennessee Valley Authority, by competing with them in the sale of electric energy, is destroying their property and rights without warrant, since the claimed authorization of its transactions is an unconstitutional statute. The pith of the complaint is the Authority's competition. But the appellants realize that competition between natural persons is lawful. They seek to stigmatize the Authority's present and proposed competition as 'illegal' by reliance on their franchises which they say are property protected from injury or destruction by competition. They classify the franchises in question as of two sorts,-those involved in the state's grant of incorporation or of domestication and those arising from the grant by the state or its subdivisions of the privilege to use and occupy public property and public places for the service of the public. [Page 306 U.S. 118, 139] what is being done is justified by reference to the Tennessee Valley Authority Act, they say they have standing to challenge its constitutionality. The vice of the position is that neither their charters nor their local franchises involve the grant of a monopoly or render competition illegal. The franchise to exist as a corporation, and to function as a public utility, in the absence of a specific charter contract on the subject, creates no right to be free of competition,7 and affords the corporation no legal cause of complaint by reason of the state's subsequently authorizing another to enter and operate in the same field. [Footnote 8] The local franchises, while having elements of property, confer no contractual or property right to be free of competition either from individuals, other public utility corporations, or the state or municipality granting the franchise. [Footnote 9] The grantor may preclude itself by contract from initiating or permitting such competition,10 but no such contractual obligation is here asserted. [Page 306 U.S. 118, 140] damages or enjoin it from further competition because of the illegal derivation of that which it sells. If the thesis were sound, appellants could enjoin a competing corporation or agency on the ground that its injurious competition is ultra vires, that there is a defect in the grant of powers to it, or that the means of competition were acquired by some violation of the Constitution. The contention is foreclosed by prior decisions that the damage consequent on competition, otherwise lawful, is in such circumstances damnum absque injuria, and will not support a cause of action or a right to sue. [Footnote 11] [Page 306 U.S. 118, 141] laws afford them protection from the Authority's competition since any utility now seeking to serve in their territory must obtain a certificate, and hence they have standing to maintain this suit against the Authority which has none. The position cannot be maintained. Whether competition between utilities shall be prohibited, regulated or forbidden is a matter of state policy. That policy is subject to alteration at the will of the legislature. [Footnote 14] The declaration of a specific policy creates no vested right to its maintenance in utilities then engaged in the business or thereafter embarking in it. Moreover, the states in which the Authority is now functioning have declared their policy in respect of its activities. Alabama has enacted that federal agencies, instrumentalities, or corporations shall not be under the jurisdiction of its Public Service Commission;15 that municipalities and improvement authorities may own and operate electric generating and distributing systems and may contract with a federal agency such as the Authority for the purchase of energy, and stipulate as to the use of the energy, including rates of resale;16 that nonprofit membership corporations may be formed for the distribution among their members of electricity with like power to contract with the Authority for the required energy. [Footnote 17] Tennessee has amended Section 5448 of its Code, which defines public utilities, so as to exclude federal corporations such as the Authority from the jurisdiction of the State Utilities Commission;18 has authorized municipalities to own and operate electric generating transmission and distribution systems and to contract for power [Page 306 U.S. 118, 142] with the Authority on terms deemed appropriate, including the fixing of resale prices;19 has authorized the formation of nonprofit membership electric corporations with like powers to contract. [Footnote 20] Kentucky has authorized municipalities to establish and maintain light, heat, and power plants;21 and has provided for the organization of nonprofit cooperative electric corporations which may contract with the Authority for purchase of energy and stipulate as to resale prices. [Footnote 22] Mississippi, which has no state law for regulation of utilities, has empowered municipal and county governments to establish and maintain electric distribution systems which may buy power from the Authority and contract as to resale prices;23 has created a rural electrical authority and authorized the formation of power districts and nonprofit competitives, all competent to purchase energy from the Authority and distribute it and to contract with the Authority as to resale rates to consumers. [Footnote 24] The Authority's action in these states is consonant with state law, but, as has been shown, if the fact were otherwise, the appellants would have no standing to restrain its continuance. As the Authority has not acted in any way in North Carolina, South Carolina, Virginia or West Virginia, the appellants' contention that its proposed entry into some or all of them confers a right to sue for an injunction against injury thereby threatened has even less support. [Footnote 25] [Page 306 U.S. 118, 144] ing the price at which the energy supplied shall be resold by its vendees. That is said to be a regulation of the appellant's business. But it is nothing more than an incident of competition; it is but a method of seeking and assuring a market for the power which the Authority has for sale, and a lawful means to that end. 26 The sale of government property in competition with others is not a violation of the Tenth Amendment. As we have seen there is no objection to the Authority's operations by the states, and, if this were not so, the appellants, absent the states or their officers, have no standing in this suit to raise any question under the amendment. [Footnote 27] These considerations also answer the argument that the appellants have a cause of action for alleged infractions of the Ninth Amendment. [Page 306 U.S. 118, 152] propaganda in behalf of the program. The Electric Home and Farm Authority, a corporation set up as a governmental agency of which the individual defendants are directors, finances sale of electrical devices, prints and circulates costly advertising in praise of the Authority program. Defendants have offered to supply electricity to large industrial customers of some of the complainants at noncompensatory and discriminatory rates. They have attempted to persuade complainants' customers to break existing contracts. Complainants cannot meet this competition because of the noncompensatory rates and because they are forbidden by state law to make discriminatory rates. The bill prays invalidation of the Act as unconstitutional and injunction and other relief against defendants. Unquestionably, the bill shows that complainants are not asserting a right held or complaining of an injury sustained in common with the general public. They allege facts that unmistakably show that each has a valuable right as a public utility, non-exclusive though it is, to serve in territory covered by its franchise, and that, inevitably the value of its business and property used will suffer irreparable diminution by defendants' program and acts complained of. If, because of conflict with the Constitution, the Act does not authorize the enterprise formulated and being executed by defendants, then their conduct is unlawful and inflicts upon complainants direct and special injury of great consequence. Therefore, they are entitled to have this Court decide upon the constitutional questions they have brought here. See Massachusetts v. Mellon, 262 U.S. 447, 488, 43 S.Ct. 597, 601; Frost v. Corporation Commission, 278 U.S. 515, 521, 49 S.Ct. 235, 237. Mr. Justice McREYNOLDS joins in this opinion. Footnotes Footnote 1 Act of May 18, 1933, 48 Stat. 58, as amended by Act of August 31, 1935, 49 Stat. 1075, 16 U.S.C. Sec . 831 et seq., 16 U.S.C.A. 831 et seq. Footnote 2 50 Stat. 751, 752, 28 U.S.C. Sec . 380a, 28 U.S.C.A. 380a. Footnote 3 D.C., 21 F.Supp. 947. Footnote 4 Georgia Power Company was enjoined from maintaining the action. See Georgia Power Co. v. Tennessee Valley Authority, D.C., 17 F.Supp. 769; Id., 5 Cir., 89 F.2d 218; Id., 302 U.S. 692, 58 S.Ct. 11. Four other complainants have since been permitted to withdraw from the litigation without prejudice to its prosecution by the remaining appellants. Footnote 5 Philadelphia Co. v. Stimson, 223 U.S. 605, 619, 32 S.Ct. 340, 343; Stafford v. Wallace, 258 U.S. 495, 512, 42 S.Ct. 397, 400, 23 A.L.R. 229; Massachusetts v. Mellon, 262 U.S. 447, 488, 43 S.Ct. 597, 601. The same rule applies to suits against state officers: Osborn v. Bank of United States, 9 Wheat. 738, 857, 859; Terrace v. Thompson, 263 U.S. 197, 214, 44 S.Ct. 15, 17; Sterling v. Constantin, 287 U.S. 378, 393, 53 S.Ct. 190, 193. Footnote 6 In re Ayers, , 8 S.Ct. 164; Walla Walla v. Walla Walla Water Co.,Quoted documents