Court Opinion

ID: 9640284
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:02:21.97047+00
Date Added: 2024-06-11T18:10:28.896219
License: Public Domain

SOPER, Circuit Judge
(dissenting).
The conclusion of fact was reached, in the prior dissent in this case [Greenwood County v. Duke Power Co. (C.C.A.) 81 F.(2d) 986, 999], that the Federal Administrator of Public Works had assumed the authority to reduce the rates for electric energy charged by private corporations engaged in intrastate business, and that he had accomplished this purpose through his control of federal funds distributable under the provisions of title 2 of the National Industrial Recovery Act (40 U.S.C.A. § 401 et seq.). The conclusion was supported by reference to the public utterances of the Administrator in which he condemned as exorbitant the prices charged-by utility companies in general, and the Duke Power Company in particular, and described his practice in cooperating with municipalities in the grant or refusal of federal funds to establish municipal plants so as to achieve the desired end. He announced that his policy had caused utility companies to adjust their rates downward in wide areas.
With regard to the project of Greenwood County, the evidence showed that an investigation of the rates charged by the Duke Power Company in the area concerned was made by the Public Works Administration, and that the rates were considered to be excessive; and that the-application of Greenwood County for federal funds to establish a competing plant was approved because the lower rates which it proposed to charge had been investigated by the Administrator and found to be reasonable and satisfactory. In furtherance of the policy of the Administrator, a provision was inserted in the first loan and grant agreement with Greenwood County that the Government should be under no obligation to advance the necessary money unless a resolution should have been adopted by the county providing for rates to be charged by it for electric energy satisfactory to the Administrator. Such rates were in fact promulgated by the County. The South Carolina Revenue Bond Act of 1933, Act No. 299 (38 St. at Large p. 411), provided in section 21 that rates for services to be furnished by such'a municipal plant should be fixed precedent to the issuance of bonds ; section 29 provided that such rates should not be subject to the supervision or regulation of any state commission or like instrumentality’ or agency, and Act No. 1095 of the South Carolina Statutes at Large, 1934, volume 38, p. 2020, authorizing Greenwood County to borrow from the Public Works Commission the money to construct the plant, declared that the project was self liquidating and that any indebtedness created therefor should not be a direct and primary obligation of the county.
The additional evidence taken upon the last trial in the District Court strongly supports the same conclusion. The administrator set up an agency known as the Electric Power Board of Review which from 1933 to March 16, 1935, had charge in an advisory capacity of the applications of municipalities desiring to establish electric power plants. During this period the loan and grant to Greenwood County was approved. The policy announced by members of this body and applied in numerous instances was precisely in accord with the Administrator’s plans, and this course was followed not only when a proposal involving revenue bonds was under consideration, but also when general obligation bonds were offered by the municipality. The procedure was to give the established private power company an opportunity to put into effect a rate equal to or lower than the proposed municipal rate, and if this was done, the application of the municipality would be rejected unless it proposed a still lower *679rate, in which event, the utility was given another opportunity to make a further reduction. The controlling consideration in the establishment of competing plants was the matter of rates and the test .applied was that such plants would be established only when the rátcs would serve as a yardstick to promote the policy of the Public Works Administration to bring about a general reduction of electric power rates.
It is true that since the decision of Judge Watkins in the court below (D.C.) 10 F.Supp. 854, (D.C.) 12 F.Supp. 70, and the decision in Arkansas-Missouri Power Co. v. City of Kennett (C.C.A.) 78 F.(2d) 911, which pointed out the illegality involved in the practices of the Administrator, an attempt has been made to repudiate the public statements concerning the policies of the Administration which had been frequently and publicly made by subordinate officials; but these statements conformed so closely to the announcements of the Administrator that the attempt to abandon them amounts to little more than an expression of regret that what had been so widely proclaimed as a praiseworthy public policy had become a source of danger to the establishment of municipal power projects. The District Judge found that there was in fact a change in the policy of the Administrator after he became doubtful of the validity of his prior acts, but so far as the proposal of Greenwood County is concerned, there was no change that affects the finding of fact that it was approved because it met the requirement that it would bring down the rates of the established local utility. The original contract of December 8, 1934, was revised on November 30, 1935, so as to include a paragraph denying to the Administrator and the Government the right or power to govern the rates to be fixed or charged for the services afforded by the project, excepting such rights as the Government might have as a holder of the municipal revenue bonds; but no new application for the loan and grant was made by the county, no new resolution of approval of the project by the Public Works Administration was given, and no change was made in the rates to be charged by the projected plant which had been adopted prior to the execution of the first contract and had received the approval of the Administrator. In fact, the county adopted a new resolution on December 6, 1935, by which the original rates were confirmed. The change in the contract was obviously made to meet, if possible, the legal objection that had been raised; but no change was made in the unauthorized and invalid condition upon which the proposal had been approved.
It is of course conceded that in the consideration of a project for approval the Administrator must necessarily exercise an executive discretion and may properly take into account the question of rates in determining whether a proposed municipal power project will have a reasonable prospect of success. It is claimed on behalf of the Government that such was the extent of his action in this case. But the evidence is to the contrary. Possessing the conviction that the rates approved by state authority were too high, he determined to use his power as an official of the national government to reduce them; and in carrying his purpose into effect he stepped across the line, went beyond the power conferred upon him by Congress and invaded the reserved powers of the states. If the National Industrial Recovery Act had provided that the power of the Administrator to make loans or grants to municipalities for the establishment of power plants should be exercised so as to reduce by competition the rates of private utilities approved by state authority, such a provision would surely have been unconstitutional. The Administrator proceeded as if such a provision were contained in the statute. The consent of the state in this instance does not save the situation because “state powers can neither be appropriated on the one hand nor abdicated on the other.” Carter v. Carter Coal Co., 298 U.S. 238, 295, 296, 56 S.Ct. 855, 866, 80 L.Ed. 1160.
We are not concerned here merely with the manifestations of an improper motive in the course of the exercise of a lawful power. We are confronted by the exercise of power not authorized by statute nor within the limitations of the Federal Constitution in pursuance of a policy publicly announced. The actions of the Administrator in this respect are of the same nature as the official conduct condemned in Anchor Coal Co. v. United States (D.C.) 25 F.(2d) 462; see, also, Philadelphia Co. v. Stimson, 223 U.S. 605, 620, 32 S.Ct. 340, 56 L.Ed. 570.
When these conclusions are reached, there is seen to be no substance in the argument that no right of the Power Company has been infringed and hence it is not entitled to an injunction. It has indeed no right to be shielded from lawful competition by the county or any other producer of elec*680trie power. Puget Sound Power & Light Co. v. Seattle, 291 U.S. 619, 54 S.Ct. 542, 78 L.Ed. 1025; Madera Waterworks v. Madera, 228 U.S. 454, 33 S.Ct. 571, 57 L.Ed. 915. But it is entitled to relief against illegal competition which originates and is made effective through an agreement entered into in violation of the law of the land. City of Campbell v. Arkansas-Missouri Power Co. (C.C.A.) 55 F.(2d) 560; Frost v. Corporation Commission of Oklahoma, 278 U.S. 515, 49 S.Ct. 235, 73 L.Ed. 483. There is of course no parallel between the substantial loss of revenue which the Power Company would suffer as the result of the operation of the municipal plant and the injury to a federal taxpayer from an improper expenditure of federal funds which was held too insignificant to form the basis of a suit in Frothingham v. Mellon, 262 U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078.