Respondents Brief — Duke Power Co. v. Greenwood County
Supreme Court brief1938
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IN THE
4 Supreme Court of the United States
OCTOBER TERM, 1937
No. 397
DUKE POWER COMPANY and SOUTHERN
- PUBLIC UTILITIES COMPANY, Petitioners,
versus
GREENWOOD COUNTY and E. L. BROOKS, 8. A.
AGNEW ‘and E. I. DAVIS, MEMBERS .OF AND
CONSTITUTING THE FINANCE BOARD OF
. GREENWOOD COUNTY, and HAROLD L. ICKES,
Se arene
AS FEDERAL EMERGENCY ADMINISTRATOR -
OF PUBLIC WORKS, Resronpents.
s
BRIEF FOR RESPONDENTS, GREENWOOD COUNTY
, AND ITS FINANCE BOARD
INDEX
Opinions of the Courts Below......... eenuwes
Statement of Case......... OE tees bre a dia
Disenssion of Facts ............... enaallce
_ Purpose of the Administrator ............... .
Examination by PWA of Duke’s Rates......
Petitioners’ 1+ idence as to Purpose of Admin- -
DE accodueneewesnaneys teasendcws
County’s Control of Plant and Rates :........
PWA Funds Used For Power — In-
MI aac ede t hese bs kone Tre
No Solicitation of Application by PWA iueone.
County’s Rates No Yardstick .. iatsseeeedaase
Damage to Petitioners ............ 2 dearer
. - Summary of Argument .................005-
CWE, so We calecavnan kana chenanesacnuae
J. Petitioners have no standing to attack
the validity of the Loan and Grant ~
; MOUNT 5 aio sceancacnasics cc uhens ;
II. The enactment of .Title IT of the National
Industrial Recovery Act is within the.
powers of Congress under the General |
Welfare Clause .......... verre e
IIL The Aid given by the Federal Govern-
ment to Greenwood County is within the
Powers of Congress waar the Commerce
NN ir a ea
‘TV. Title II of the National we Re-
7 covery Act does not violate the Tenth
URE oa cc ces cusvauansensenel’s
A of WS
95
31
+ 2 wee
er -
.-s INDEX—Continued
V. There is in Title II no unlawful dele-
VII.
VIII.
Conclusion eoeeotcoeeeaeeeoaeeeeeeoevee eee eevee ese eeeee
gation of Legislative Power to the Ex-
ecutive rere ey eer Te oT Tre rT eT ere :
.-In Making the Lone a Grant to Green-
wood County the Administrator is Not
Violating the Statute :.............0.. :
The Petitioners’ Evidence,. Consisting
of the Testimony of Frank T. Post,
Edwin Vennard, D. E. Byerley and -
George Carter and . Plaintiffs’ Ex-
hibits 50 to 74, was not —
Evidence in this Case ......... ee |
A. The Testimony is Irrelevant to > Any
Issue'in this Case ....... Bec ciscces
B. The Testimony is Repugnant to the
EP Pr re ere
Procedure Adopted by the District Court |
. After the Remand was Proper ........
Pace
49
Sukie phe Uae et Fe ee
Oo eee
De Cambra v. Rogers, 189 U. B., BED. oc ccccecse
Hampton & Co. v. U. S., 276 U. S., 394 .....-.
Heslep v. State Highway Dept., 171 S. C., 186,
Duke Power Co. v. Bell, 156 S. G 299, 152
a) OSS.) eee eee
Egan v. Hart, 165 U. S., 188 . pivedesereseucees
Ex Parte Albert Levitt, 82 Ris Bilis Bi vcccdecdes
Field v. Clark, 143 U. S, GE saceaawassaveess
Frost v. Corporation Commission, 278 U. &.,
' esr r errr: Trrrrrry? TrTTtirt
Hammer v v. _Dagenhart, 247 U.S., 251........ in
Helvering v. Davis, 57 S. Ct., 904...........+.
Ee } eee aa
Hill v. Wallace, 259 U. S., 44... 0..-2s0esensee
)
x
A .
. CITATIONS
.Cases cited: PaGE
Alabama Power Co. v. Ickes (App. - C.), 91
Fed. Circuit, 303. .........0ee cece le eeeeees . 25
Allegan v. Consumers’ Power Co. (C. C. A,
6th), 71 Fed. Cireuit, 477...........0++000 25
Arizona v. California, 283 U. S., 423 .......... 36, 39
Arkansas-Missouri Power Co. -v. City of . :
Kennett (C.-C. A., 8th), 78 Fed. Circuit, 991. 16
' . Butterfield v. Stranahan, 192 U. S., 470 ....... AT
Carter v. Carter Coal Co., 298 U. 8., 238 ...-.. 38
Chicago Junction case, 264 U. S., 258 ......... 28
Child Labor Tax Cases, 295 -U. S., 20 ........ 38
Cincinnati Soap Co. v. U. S., 301 U. S., 308 ... 47
City of Joplin v. Southwest Missouri Light Co.,
a 191 U. &., 190+. .cccsegs a PT TTTTTT 27
<- (ollins-v: New Hampshire, 171 U.S&., 30 ...... 37
Dakota Telephone Co. v. South — 250 U.
UGB cnn cc cccepedpaccevccccescectoccepes 55
’ GITATIONS—Continued ~~.
x
Cases Cited:—Continued “Page
Hitchman Coal & Coke Co. v: Mitchell, 245 U.
PM cits Lee speebasindokadeatucnsent ius ., 29
Isbrandtsen-Moller Co. v. U. S., 81 L. Ed., 344, .
BOO UO. B., 19D 2... cece ceececccccgecceces . 49, 55, 59
Levitt, Ex Parte, 82 L. Ed.,1................ 25
Madera Waterworks v. Madera, 228 U. S., 454. - (QT:
Maloney Tank Mfg. Co. v. Mid-Continent Oil ;
Corp. (C. C. A., 10th), 49 F. (2d), 146...... ~ . + 64
Massachusetts v. Mellon, 262 U. S., 447, 482.... 27, 44
® McCray v. U.S., 195 U.S., 27 ............000. 39
Monongahela Bridge v. U. S., 216 U. S., 177 . | 47
‘Morgan v. U. S:,-298 U. S., 468 .............. | 36
New Jersey v. New York, 283 U. S., 336 ...... 36
Northwestern Union Packet Co. v. Clough, 20
Se PERE err rre 63
Page v. Arkansas Natural Gas Corp., 286 U. S., .
errr err rT ree err ere rrr 5
Panama Refining Co. v. Ryan, 293 U. S., 388 .. 46
Park v. Greenwood County, 174 S. C., lees 176
S. E., SRDS pee SOO <a et, 26, 44
Philadelphia Co. v. Stimson, 223 U. S., 605 .... - 85
Pierce v. Society of the Sisters, 268 U. S., 510. : 29
Puget Sound Power & Light} Co. v. City of ,
Seattle, 291 U. S., 618 ....§...........08. 27
Railroad Co. v. Ellerman, 105 U. ay” re 28
Richmond Guano Co. v. DuPont, ete., Co. (C.
hn Oe, Be Bn Oe iin kd iB voor ccecs :
64
Schecter Bros. v. U. S., 295 U. S, 495........ wf 46
- Smith v. Kansas City Title Co., 255 U.S.,180./ . . 39
Sonzinsky v. U. S., 300 U. S., Pe atuacksseess 38
Southern Power Co. v. N. C.. Public Service
Commission, 263 U. S., 508 ...... ere Sea afiily: 4
\ eqwiasrnene--Conttened
Cased Cited: —Continued ‘
Spalding v. Dickinson, 161 U. S., 483 ........-
Sprunt & Son v. U. S., 281 U.S., 249 ..-....--- ,
Steward Machine Co. v. en 81 L. Ed., 779;
mmthe tis damns sees cecndctssreiintascveass
Swayne & Hoyt,.etc., Co. v. U. S., 81 L. Ed.,
400, 22. U. Ba, anna 2 cece ccssccccccccccsce
- Texas & N. O. R. Co., v., Brotherhood of Ry.
Clerks, 281 U. &., 548 .:........seceeeeees
Truax v. Raich, 239 U. S., 33 Sedensawanhudie
Union Bridge Co. v. U. S., 204 U.S., 364 havens
U. S. v. Butler, 297 U.:S., 1 .......... iaaeainn .
U.S. v. Commercial Credit Co., 286 U. S., 63 ..
U.S. v. Doremus, 249 U.S., OR ick etadewsune |
U. S. v. Johnston, 268 U. S., 220 ..........-.--
‘U.S. v. Rio Grande Dam & Navigation Co., 174
Vz: Bg GBD ccc cncccccesccscscsscces aisiads 4
Veazie Bank v. Ferino, 8 Wall, 583 ......%...
West v. Hitchcock, 205 U. S., 80 .......... as
Statutes Cited: ; |
oe ft ee jptiade sl eidiea on
XXXVIII 8. C. Stats., 411, 1392, 1543 ........
XXXVIII Stat, 411, 418 .....5.5. 005 ee cnnees -
Text Books Cited:
1 McQuillin, Municipal Corporations, 642,
athens GEE gcc csccsadbecncciacadases eee |
27 .R. C. L., 1442, ND Sis ens eanee
Wigmore on Evidence (?d. Ed.), Vol. 1,
Page 617, Section 304 ,...........-- pie 2
Page 336, Section 102 ............ prrree aaa
- Pace
31, 45
2s fe
IN THE
me Court of the. United States
OCTOBER TERM, 1937 |
No. 397
*
DUKE POWER COMPANY and SOUPHERN PUB-
LIC UTILITIES COMPANY, Petitioners,
versus
GREENWOOD COUNTY and E. L. BROOKS, S. A.
« AGNEW and E. I. DAVIS, MEMBERS OF AND
CONSTITUTING THE FINANCE BOARD OF
GREENWOOD COUNTY, and HAROLD L. ICKES,
AS FEDERAL EMERGENCY ADMINISTRATOR
OF PUBLIC WORKS, Responpents. 4
e
u
| BRIEF FOR RESPONDENTS, GREENWOOD COUNTY
AND ITS FINANCE BOARD
v
_ OPINIONS OF THE COURTS BELOW
The opinions of the Courts below which have been
officially. reported are as follows:-
Opinion of the District Court on motion to dismiss,
. 10 Fed. Supp., 854 (R. 117, April 23, 1935). ;
Opinion of the District Court on the merjts, 12 Fed.
Supp., 70 (R. 477, August 10, 1935).
Order of Circuit Court of Appeals remanding cause
to District Court, 79 Fed. (2d), 995 (R. 515, Dee. 5, 1935).
Opinion of Circuit Court of Appeals on the merits,
81 Fed. (2d),.986 (Feb. 22, 1936).
Order of this Court remanding the ae
opinion on the merits, 81 L. Ed., 149 (R. 539, Dee. 14, 1936).
Opinion of the District Court upon rehearing of the
cause, 19 Fed. Supp., 932 % 744, May 26, 1937).
Opinion of the Cireuit “Court of Appeals, 91 F. (2d),
665 (R. 848, —— 6, 1937).
STATEMENT OF CASE
This bill in equity was instituted in the District Court
of the, United States for the Western District of South
Carolina on November 7, 1934, against Greenwood County
' and the members of its finance board (R.-2). Harold L.
Ickes, as Federal ergency Administrator of Public
Works intervened and was made a party defendant on
December 4, 1934 (R. 65). , vr
The defendants’ motion to dismiss the bill was over-
riled by the District Court (Rv 117) and the matter. was
referred to a Special Magter to take testimony. (R. 152). |
The Court, after the testimony taken had been reported to
jt (R. 157), granted the injunction prayed for (R. 484).
-From this order the defendants appealed to the United
States Circuit Court of Appeals for the Fourth Circuit, but Oe a
because of the fact that during the pendency of the appeal ~
the Administrator and the County had entered-into &
. superseding Loan and Grant Agreement, the Circuit Court
of Appeals, upon motion of the Administrator, ‘yenianded
the cause to the District Court (R. 515).
The District Court, after admitting additional testi,
mony, refused by its order dated December 21, 1935, to
vacate the injunction order (R. 518-527). Upon appeal .by”
4
a-<
3
the defendants, the Cireuit Court of Appeals reversed the
injunction orders of the District Court and ordered the
bill dismissed (81 Fed. (2d), 986). e »
Certiorari was granted by this Court on the petition
of Duke Power Company (298 U. S., 651), but, after a hear-
ing had been had, this Court, without expressing an opin-
ion on the merits, reversed the order of the Circuit Court
of Appeals and “remanded the cause to the District Court
with directions to vacate the injunction orders of August
26, 1935, and of December 21, 935, and to retry the case
(R. 540, 81 L. Ed., 149). *
The District Court, after vacating the injunction
orders (R. 541) and gtanting a temporary restraining
order (R. 550), heard the ¢ase on its merits, and by its final
decree (R. 799) denied the relief prayed for by petitioners
and dismissed the petitioners’ bill on the merits, filing its
opinion (R. 744) and findings of fact and conclusions of ©
law (R. 779).
. From the decree of the District re the petitioners
appealed to the-Circuit Court of Appeals. A cross appeal
was prosecuted by the defendants from that portion of the
decree directing that one-half of the costs be taxed against
the defendants. 4
The Circuit Court of Appeals, by its decree dated
August 6, 1937 (R. 878) affirmed the decree of the District
Court except in so far as it taxed one-half of the costs
against the defendants, and as to this the District Court’s
decree was reversed.
The petition for certiorari was granted by this Court
October 25, 1937.
¢
&
Bere:
~~)
- £ ‘¥
’ DISCUSSION OF FACTS
Petitioners’ case has always seemed to us to fest neces-
_ sarily upon the ong of their assumptjon that the
evidence completely blishes certain ultimate conclu-
sions of fact favorable to them. Their arguments on the
fundamental legal questions mvolved all lead from one or
more. of these assumed factual conclusions, are all based
wholly upon these conclusions and are all unavailing if
these conclusions are incorrect. We submit that the Record,
especially in view of the two opinions below, ¢learly shows
these ‘asgumptions of fact to be erroneous and the further, -
use by petitioners of such disproved conclusions as pre-
_ mises in the various portions of their argument to be un-
warranted.
The District Court hae mage complete Findings of Fact
covering all of the factual matters at issue between the
parties in this litigation and as to which evidence was ad-
duced. We could not in any attempted summary hope to
produce.a moye cobcise or coherent picture of the factual
background than that continued in the District Court’s
Findings as they appear on pages 779-790 of the record.
- The Cireuit Court of Appeals, after examining all the
testimony and exhibits in the light of petitioners’ assign-
ments of error accepted these findings as correct and in
confirming them made independent references, at least in
connection with the more important, to those portions of the
Record which established them. This concurrence of the
two lower Courts on the questions of fact raised concludes
‘those questions since this Court has definitely announced
thé rule that if does not grant certiorari to review evidence
and discuss specific facts. U. 8. v. Johnston, 268 U. S., 220;
Southern Power Company v. North Carolina Public Service
Commission, 263 U. S., 508. 0
‘The rule is so well settled that where the findings of
fact by a District Court are concurred in by the Cireuit .°
v
«
, &
¢
~
5 res
‘Court of Apftals they will not be reviewed by this Court
and will be accepted unless clear error is showpthat we cite’
only a few of the more recent cases: .
“Page v. Arkansas Natural Gas Corp., 286 U. S.-
269. .
Texas & N.O. R. Co. v. Brotherhood of Ry. Clerks,
281 :;U. S.,-548. ww
U. 8. v. Commercial Credit Co., 286 U. S., 63.
In view of this rule; of the explicitness of the findings
by the two lower Courle and of the abundant support for
these findings in the Record, we think we are clearly justi-
fied in taking the position that the Findings of Fact by the
District Court, at least insofar as they are specifically con-
curred in by the Circuit Court of Appeals, may. now be re-"
garded ‘as the facts of ‘the case. However, since petitioners
have sought so consistently throughout the litigation to
establish certain allegations as facts and have based their
- ease so completely on the assumption that they are facts,
it is advisable for us:to separately consider the more sig.
nificant of these findings ‘to show how fully they are
established by the record.
Purpose of the Administrator
Petitioners’ contention, which has assumed more and
more importance as the litigation has proceeded and. other
positions have been aveakened, is that. the Administrator
made this loan and grant for the purpose df reducing
petitioners’ rates, so doing because of an established policy
on his part to. use PWA money to reduce power rates :
throughout the country. There is no evidence whatever
establishing the immediate purpose attributed by peti-
tioners to Mr. Ickes-and thé té&timiony as to his general
policy falls far short of proving even the existence of such
a policy. The two Courts below have held that just the -
contrary has been proved and have found as a fact (R.
* .
- .
— .
a=
ome. <a ieeeeegeele ra
es ae
eo s
- 788, 856) that the Administrator in making the loan and
grant to Greenwood County had no purpose of lowering
petitioners’ rates; his-pelicy and that of the Public Works
Administration being correctly set out in the Administra- |
tor’s Report to the U.8. Senate (73rd Congress, second ses-
sion, Senate document 167; defendants’ Exhibit 70) :
>
The fundamental purpose of the Public .Works
Administration is to relieve unemployment and to in-
crease purchasing power through the construction of
useful publi¢ works, thereby increasing the consump: °
tion of goods and also providing émployment in the
capital gcods mmdustry.
The finding as to the general policy of the Public
Works Administration is justified by evidence throughout
the record. Mr. Ickes, testified on the stand in Spartanburg
that he had no intention of exercising any control or in-
fluence over the rates to be charged by Greenwood County
(R. 642) ; that he had no interest in the rates of the county’s
competitors save as af investor in revente bonds of the
county (R. 643); thafgthe statement contained in defend-
ants’ Exhibit 70, Senate Document -169, is a correct state-
ment of the policy of the Puhlic Works, Administration
(R. 645); that in connection with thé application of Green-
wood County he took, into account no considerations other
than those general ones to which he had referred (R. 646) ;
that neither he nor the Public Work&\dministration had
any intention of engaging in the operation, directly or in-
directly, of the Greenwood County project (R. 651); and.,
that he would have made the loan and grant to Greenwood
County regardless:of the rates of the Duke Power Com-
pany, or his opinion of the rates, if Greenwood County had
legal authority to enter into the contract and could satisfy
the Public Works Administration that it could —
the loan (R. 667). -
__ No purpose on the part of any representative of the
Public Works -Administration other .than that: declared in
pO EMERY Reston me
ow
7 , ’
the Act was disclosed or evidenced to any of the representa-
- tives of Greenwood County. Mr. Emmett I. Davis, secretary
of the Greenwood Finance Board, testified (R. 688): *‘I
_ know of no instance either in correspondence or in inter-
views where the Publie Works Administration, or any of
its employees or agents, have said or imiicated that the
direct or implied object of this loan and grant was or is for
the purpose of forcing down Duke Power Company rates.’ :
‘To the same effect is his testimony on page 689 of the reeg P
ord; the teistitnofy of Mr. Barksdale (R.. 668); of Mr.
Sunnie (R. 696), and of Mr. Sweeney ¥R. 698). ,
Examination by PWA of Duke’s Rates
The fact that the Public Works Administration ex-
amined Duke’s rates before approving the application of
Greenwood County does not mean thaf they had any de-
sign to force down those rates. As to this the District Court
made a separate finding (Finding XIX, R. 788) approved
by the Circuit Court (R. 856) pointing dut that, since the - “~
bonds offered by Greenwood County’fér the loan were | ,
revenue bonds depending for their security upon revenues
of the project® the Public Works Administration had to
. satisfy itself that the county could meet the rates of the .
private utility operating in the territory and thus be as- “
sured of the reasonable security required by Co
under Title Il of the National Industrial Recovery Act,
_ Section 203 (a), (Appendix to Government’s Brief, p. 4).
On the originfil hearing Mr. A. C. Bruce, of the Federal
Power Commissi , poigted out the necessity of examtming
the Duke Power mpany’ s rates (. 294)¢ as did-alsg Mr.
C. E. Rose (R. 300) 307).
| Mr: Ickes stated under oath that his interest was tat
ej * of any bond holder, saying (R. 643): |
are I have no interest in the rates of t County’ s “4
- competitors because of our investment in fhe County’s :
J
~
ce P °
plant. The fact that the rates of the plaintiffs were
high or low might indirectly affect the security. of the
County’s bonds. If the plaintiffs reduced their rates
below the cost of producing and supplying current
and the County had to meet these rates in order to hold
its customers, it would have indirectly an effect. Other -
than that which I have just indicated, neithér I nor
the United States Government has any interest in the
plaintiffs’ rates. °
Mr. Ickes states (R. 667), that he would haye made:
the loan and grant to Greenwood County regardless of the
petitioners’ rates if he were otherwise satisfied of the
legality and security of the loan. On cross examination he .
repeated, with perhaps even more emphasis, that his only
interest in the rates of either the County or the petitioners
was the interest of a prospective bond holder (R. 665).
Dr. Clark Foreman, the head of the Power Division of
the Public Works Adulistetration, thus states (R. 671) the
consideration that iggiven to rates when revenue bonds are
offered: 6
If the project is a competitive project, that is to
say, if it would be competitive with the existing private
utility were it built, then we would have to assure our-
selves that. the rates of the project would be suffi-
ciently low to secure business and sufficiently high to
pay out the bonds which we would lend on. * * * We .
do not give consideration to the rates of the pro
‘municipal plant or of the existing private utility for
_ any other purpose than that of reasonable security.
Mr. D. T. Duncan, County Engineer, who designed the.
rate schedule, was moved by the same consideration. He
states in his tegtimony that he realized the County had to
have rates under h they could sell power, and that they
must undersell the steam plants operating im the territory
and the Duke Power Company in order to get customers
(R. 695). : ‘ . ' >
.
os R= GR er ee ee
9
Petitioners’ Evidence as to Purpose of Administrator
In contradiction of these definite and authoritative
statements as to the true policy of the Public Works Ad-
ministration petitioners have only offered certain PWA
press releases, excerpts from Mr. Ickes’ book, ‘‘Back to
Work,”’ remarks madé on cross examination at the original
hearing by an engineering witnéss, C. E. Rose, and the
testimony of the witnesses Vennard, Byerley, Carter and
Postt the last hearing before the District Court. The ex-
cerpts from the press releases and from the Administra-
tor’s book lose the meaning.attributed to them by’ peti-
tionérs when replaced in their original context and the
manner and purpose of their publication is considered. The
remarks of the witness Rose, a PWA subordinate qualified
to speak only as to engineering matters, are equally un-
reliable as evidence of the real policy of the Administra-
tor. All of these—press releases, book and _. testimony of
subordinate—were covered by Mr. Ickes when he was on
the stand and lie flatly contradicted the implications drawn
by petitioners from them (R. 648-51, 666-70).
There remains to be considered then, in this connec-
tion, only the effect of the evidence offered by plaintiffs at
the final hearing before the Distriet Court. The testimony
of the witnesses Post (R. 577), Vennafd (R. 590), Byerley
(R. 606), and Carter (R. 610) and Plaintiffs’ Exhibits 50
to 74 (R. 595-602; 608, 611-14, 619-26, 702) were offered
for the sole purpose of establishing the existence of a
‘power policy’’ in the ‘Public Works Administration—a
policy to procure, in addition to the results anticipated by ©
the statute,‘a reduction in private utility rates. All of this
evidence concerned activities of members of the Electric
Power Board of Review, a blard which at one time existed
in the Public Works Administration for the purpose of ~
reviewing applications for the financing of electric power |
. plants and of making recommendations in connection with
: . ‘re a
+ eae
\o
10
such : deabiodtees to the Adhciistebicanee The individual
- members of the Electric Power Board of Review, according
_ to petitioners’ argument, went beyond this adyisory cap&pity
and in handling applications.used their power for the pur- .
pose of causing private utilities .to lower their rates, thus
evidencing the existence of a fixed purpose on the part of :
the Public Works Administration to reduce utility rates.
We shall argue below that the testimony adduced for
‘ this purpose should not haye been admitted in evidence;
but we say also that, even if it be considered competent, it -
is entitled to little weight as against tlie cleat statements
by the Adniinistrator to Congress and to the Court as to
his purposes and policy. The substance of this testimony
can be stated.as follows: When a utility learned that a
municipality at the time being served by it had applied to
the Public Works Agministration for a loan or grant with ~
which to erect its own generating or distribution system,
the Public Relatichs Counsel of that utility went to Wash-
ington and conferred*there with a member of the Elecgri¢
Power Board of Review, either Mr. Henry T. Hunt or Mr.
Otto Rau, in regard to the city’s application; sometimes
filing a formal protest, sometimes handling the matter in-
formally. In the discussion the quéstion of utility ‘rates
came up; whether raised by the utility representative or
by the Public Works representative is not clear from the
testimony. In some eases the utility: proposed that they —
would reduce their rates an@the municipality would with-
draw its application. When sucli a proposal was made it
was usually referred, as the exhibits will show, to the
municipality, and at times it was suggested to the munici-
pality that it consider the question of WERT EWING © its ap-
plication.
Negotiations of this character were téstified to in re-
gard to numerous municipal applicatipns, but in no instance
did. the petitioners offer testimony as to what was the
?
“a
2 a : 2
ri
11
eventual outcome of the applications. After this testimony
was in, Dr. Clark Foreman, the head of the Power Division,
which is the board now charged with duties similar to those
of the’ old Electric Power Board of Review, attempted,
over petitioners’ objection, to state the final disposition of
the applications referred to. in petitioners’ testimony. In
all cases which it “was possible to trace to a conclusion it
developed that’ ‘the question of lowering utility rates was
not the determining factor. in‘ granting or refusing the
loan, except insofar as the rates affected the security (R.
4673-76). Regardless, therefore, of what discussions took |
place between Mr. Hunt and Mr. Rau and ‘the representa-
tives of the utility companies, none of these discussions had
any effect in determining whether the allotment would be=
- granted or not.
‘Although some of these applications had to do with
general_obligation bonds rather than revenue bonds, the
Public Works Administration would even in those cases
have some legitimate interest in prevailing rates. The 1930
census figures, of which this Court will take judicial notice,
show that the municipalities whose applications were re-
ferred to by petitioners’ witnesses were almost all very-
small in population and there was the likelihood to be con-,
sideged that the revenue from the proposed plant would be
the only source from which the municipality could ohtain
’ funds to pay: the debt. Under a situation of this sort a cau-
tious investor would have a very real interest. in. assuring
himself before purehasing general revenue bonds of a small
municipality that the power plant to be constructed with the
proceeds of the bonds could meet local competition so as
to be operated at a profit and actually provide the munici- ©
_ pality with sufficient funds to retire its bond issue.
~ Another equally important reason for the ineffective-
ness of this line of testimony is that it is wholly ‘concerned
with the activities of on2 ‘small board and the actual au-
12
thority o& that board was definitely and indisputably
limited in scope.* The board was created by an order of
the Administrator dated May 9, 1934 (Plaintiffs’ Exhibit
46, R. 574). This order gave to the Electric Power Board of
Review only:the right to recommend; it reserved to Mr.
Ickes the sole power of making allotments. When it came
_ to the Administrator’s attention that the board was exceed-
ing this authority, he wrote a themorandum to Mr. Hunt
(Defendants’ Exhibit 79, R. 714), admonishing the board to
confine its powers ‘‘to what I originally intended them to
be, namely, the review of pow er projects and the making of
reports and recommendations to me for my -decision.’’ The
board was dissolved by an-order of the Administrator,
/March 16, 1935 (Defendants’ Exhibit 78, R. 713).
” Parenthetically, it occurs to us that regardless of the
_purpose of the members of the board: in carrying on negoti-
ations with power corapanies as to their rates, the effect _
of what they did was to provide the Public Works Admin- —
istration with information extremely valuable in its legiti-
mate determination of whether there existed in each ap-
‘ plication the reasonable security demanded by the Statute.
The result of the negotiations was.a definite ascertainment
of the extent to which the existing utility was willing to
reduce its rates. Having before it the lowest possible figure
at which the private utility was willing to operate, the Pub-
lie Works Administration not only knew that if the pro-
posed municipal .project could approximate those rates
when constructed it could sell power and be self-liquidating,
but was also assured that after construction the municipal
‘plant would not be subjected to ruinous competition.
Furthermore, ‘this whole line of testimony has no
material effect in this case because there is no evidence at
———-__1A_
*In fact, as we shall point out below in discussing the admissibil-
ity of the evidence, the petitioners’ testimony does not even purport to
- show any illegal action by the, Electric Power Board of Review as.a
board. It refers only to statements and sepereanietens made by the indi-
— who composed the Board. -
(18
all that the Electric Power: Board of Review or anyone else
connected with the Public Works Administration negotiated
with petitioners as to their rates or made any effort at all
to foree down their rates. Had there been any correspon-
dene2 between the Public Works Administration and Duke
Power Company suggesting that the Power Company re-
duce its rates, or conversations to that effect, certainly
the petitioners would have offered the correspondence or
testimony as to the conversations in Court.
As a matter of fact, if an examination is made of the
testimony introduced by the Duke Power Company in July,
~1934, before the Board of Review in protesting’ on the
a County application (Defendants’ Exhibit 57),
: it, vill clearly be seen that no such diseussion had been had.
Ww ‘th the Duke Power Company. This exhibit, which is being
sent up with the Record, is a very interesting commentary
on-the liberality of the Public Works Administration in
permitting a protestant. to go into all forms of protest.
which it desired. It will be seen that the board permitted
counsel for Duke Power Company to introduce evidence
relating to the charities of the Duke Endowment because
the Duke Endowment happened to own stock in the Duke
Power Company, something that was far afield in the
matter under discussion. It permitted Duke Power Com-
pany to produce engineering testimony in which they at-
tempted to persuade the Public Works Administration that
the project was not financially, sound. It permitted Duke
Power Company to offer testimony of textile executives
protesting against the Greenwood ‘plant upon the ground |
that it might permit lower power rates to certain textile
mills in Greenwood County which were not served by the
Duke Power Company..
Finally, id j is our position that even if this testimony
does tend to show the existence of a purpose on the part of
the Electric Power Board of Review to reduce private utility
i
iA
an
\
a
ieee 14
’ rates and this purpose be attributable to the Administrator,
still at the time of the execution of the present contract
between the Public Works Administration and Greenwood
County on November 30, 1935, the Electric Power Board of
Review had been dissolved for ten months, its actions re-
pudiated by the Administrator and its policies abandoned.
At that time the Power Division had been established and,
- its policy in making recommendations is clearly set out in
the testimony of Dr.. Clark Foreman, its director (R. 670-
72). Dr. Foreman stated that no consideration is given to |
the rates of a proposed municipal plant or of the existing
private utility ‘‘for any purpose other than that of reason-
able security.’’ He stated: that since he has been director
of the power division he frequently discussed matters of
policy with the Administrator and that there has been no
change in policy since his appointment (R. 673).
The holding is implicit in both opinions below that the
fact that an extraneous’ power pdlicy once existed and
motivated the actions of some of the boards or departments
‘of the Public Works Administration cannot affect our
case if. ‘that policy had been abandoned. The Courts below
in interpreting the testimony as to the policy of the Public
. Works Administration from the time of its inception to the
present adopted the view that at one time an emphasis had
been placed upon the social desirability of lowering power
rates but that such policy was abandoned. We do not agree
with the lower Courts in this interpretation of the evidence,
but we do rely upon their conclusion that, even accepting as
a fact the existence at one time in the handling of applica-
tions by the Public Works Administration of a policy apart
. from the purposes of Title II and the purposes announced
by the Administrator in his Report to the Senate, the exis-
tence of that erstwhile policy does not affect the policy
now existing or invalidate acts done under that proper
.
7
15
| policy. The petitioners have no vested right in i an adminis- ¢.
trative error. .e
Courity’s Control of Plant and Rates
It seems to us that any purpose to force down peti-
tioners’ rates by subsidizing competition with petitioners
by the County would on its face be futile unless the Ad-
ministrator had the power to control the rates of the Coun-
ty. Both Courts below have found that no-such right to con-
trol the rates exists (R. 783, 854)..Paragraphs 12 and 13 of
the contract of November 30, 1935 (R.:501), could not more
definitely evidence the intention of the parties that after
the plant is constructed all matters of operation, including
the right to fix rates, will be under the control of the Coun-
ty. The only rights which the contract gives the Adminis-
trator as to rates for ‘serviee are those rights which a —
holder of revenue bonds would have regardless of contract
under the Constitution and laws of South Carolina.
It might be well.at this point to discuss briefly the
changes made in the contract of December 8, 1934, by the
contract of November’ 30, 1935, and the reasons for those
changes. The 1934 contract contained a provision requir-
ing the borrower to;have adopted a resolution as to rates.
satisfactory to the Administrator before the Government
should be under any obligation to make the loan. This pro-.
vision was intended by the parties to the contract to apply
only to the initial rates (R. 650) and we believe by its terms
had only such application. However, this provision. was
construed by the District: Court on the original motion to
’ dismiss (R. 122, 480) as giving to the Administrator con-
tinuing control over the rates. Thus construed the provision
violated the South Carclina Revenue Bond Act (Appendix
to Government’s Brief, p. 56), which required the: munici-
pality to ‘reserve the right to alter the rates in order. to
‘properly service the bonded debt. Because of the respect
which respondents had for the District Court’s construction °
16 .
of this provision, a new contract was drawn with a view
to clarifying the language so that by no possible interpre-
tation could it be said to violate the State Act. $
It was also thought advisable to change the contract in
another respect. The contract of December 8, 1934, con-
tained GéFtain provisions as to labor which were construed
in the case of Arkangas-Missourt Power Company v. City
of Kennett, Mo., 78 F. (2d), 911, as giving to the Adminis-
‘trator the right to impose new labor conditions after con-
struction had been started. The Court of Appeals in the
Kennett case held that.this constituted an illegal delegation
of the municipality’s right to control municipal construc-
tion. This point was never raised in our case, but, when the -
opinion in the Kennett case was called to Mr. Ickes’ atten-
tion, he decided to submit new contracts to the various mu-
-nicipalities eliminating these labor provisions as well as
the provisiens found by the District Court in our case to
be objectionable te State law (R. 643-45). 5
‘Petitioners’ brief makes the point that since Green-
wood County’s rates, which were adopted prior to the
change of the contract (November 30, 1935), were readopted
by the County after.the new contract, there is no substan-
tial difference between the two contracts, and the further
point that the date of the original allotment, July, 1934,is
thedetermining date on the question’ of legality of the proj-
. ect. Petitioners’ counsel, however, fail to point out that the
rates proposed for the Greenwood County project were
designed by the County ’s engineers prior to the time the
application was made to PWA, and have never been
changed since that time. This fact was thoroughly estab-
lished by the District Judge’s sixth Finding of Fact (R.
781-782), to which’ no error was assigned when the peti-
tioners appealed to the Cireuit Court of Appeals. It is clear,
therefore, that Greenwood’s rates were not a result of any
conference between the Administrator and the County.
it een
PWA Funds Used for Power Projects Insignificant
Another fact which disproves the existence of any ef-
fort by the Administrator to use the funds appropriated
to the Public Works Administration to carry out a policy
of reducing private utility rates is that only a very small
proportion of the funds available to him for the construc-
tion of public works has been used to promote competitive
power projects. Both of the lower Courts were impressed
by the unimportance of this field of PWA activity in com-
parison with the work done by it in other fields (R. 786,
856). They both stressed the fact that as of January +
1937, there were 9,389 non-Federal projects of the Public.
Works Administration of which only 282 were power -proj-
ects and only 92 of these 282 involved competition with
existing private companies. The total amount involved in
these 92 so-called competitive projects was only $27,339,947
as compared with '$1,480,612,543 involved in the 9,389 non-
Federal projects. This is less than 1%<of th total number
of allotments and .98% of the total amount of allotments.
The Courts below quite logically adopted the view that it
does not seem reasonable to say that Mr. Ickes acted as
Administrator with the primary purpose of causing com- -
petition to private utilities and yet used so ‘sparingly his
broad powers and the vast funds available to him to carry
out that purpose. a
No Solicitation of Application by PWA
The factual position taken in petitioners’ argument that
_ the Publi¢ Works Administration solicited or- instigated
Greenwood County’s application for the loan and grant so
thatcompetition would be given the petitioners and their
: rates forced down is without support in the record, the evi-.
dence being definitely tq-the contrary and amply support-
ing the concurrent findings by the two lower Courts (R.
784, 853) that the determination to engage in the genera-
Q . s
18
tion and distribution of electric power was made by the
properly constituted authorities of Greenwood. County of ©
’* their own free will and that there was no solicitation nor
coercion on the part of the Public Works Administration
~
or.any of its Tepresentatives. *, .
* Plaintiffs’ Exhibit 38 (R. 368-370) shows that the Spe- |
- @ial Board for Public Works approved Greenwood Ceanty’s
application and made an allotment on June 20, 1934; ‘that
it was approved by the President on June 27, 1934, and that
after reconsideration had been given to the allotment by -
reason of the protest of the Duke Power Company (de-
fendants’ Exhibit 50, R. 463; defendants’ Exhibit 57); the
allotment was nedifbemed’ by the Board and the President -
on November 7th and 8th, 1934°(R. 368-69), and was in-
cluded in a list signed by the Presidert on the latter date
(R: 370).
The uncontradicted dentienony of Mr. D. T. Niele,
Chief Engineer for the County (R. 267-274), shows tliat the
rates for the proposed Greenwood County project, were de-
signed by him upon his own calculations of the costs, finane-
ing and possible market for the project. These rates set up
prior to the application of the County to the Public Works
Administration are the. same rates which the County now
expects to charge. They were fixed by resolution of, the
’ County Board passed pursuant to the South Carolina Reve-
nue Bond Act (R. 20-33). They were reaffirmed in the rate
resolution of December 2, 1935 (defendants’ Exhibit 73), —
adopted immediately after the executing of the existing
loan and grant agreenient of cast eeian 30, i.
Mr. Davis states (R. 687) :
Neither the Public Works Administration of the
Bederal Government or ‘any other branch or repre-
sentative of the Federal Government, so far as I know,
solicited or suggested the filing of this. application.
Greenwood County has taken the initiative-in filing the
application, pressing the Public Works Administra- .
4
4
»
‘ ,
rem RE coe URE Ree arte
*
q 19 .
tion for an allotment and in litigation involving the
case.
He further states (R. 689) :
I have not received at any time from anyone con-
nected with the Public Works Administration’ a sug-
' gestion that Greenwood County withdraw its applica-
tion in exchange for a lowering of rates in territory
served by the Duke Power Company.
Mr. Duncan said this (R. 693) :
The original rates fixed in the application were
fixed by me and by my engineering staff without any
advice or suggestions from anyone connected with the
Public Works Administration. In going over these mat-
ters again at the request of the Finance Board my
- engineering staff has acted independently of the Pub-
-lic Works Administration and recommended these fig-
ures to the Board without consultation with the Public
Works Administration engineering staff. * * * No one
connected with: the Public Works Administration or
any other branch of the Federal Government solicited -
this application from me, or, as far as I know, from
any member of the Board. Greenwood Count filed the
application and has pressed it with the Public Works
Administration as vigorously as possible. * * * At
all times the County has been the body pressing for
this allotment, It has not been solicited in any fasiiion,
_.as far as I know, by the Public Works Administration.
the;
Secretary Ickes states unequivocally (R. 646) :
_In no instance did I solicit specific applications.
The applications came voluntarily from the community
that wanted tlie public works projects, accompanied by
engineering and legal data. Sometimes it was incom-
plete and we had to send it back for additional infor-
mation, but it was always initiated by the local com-
munity.
Specifically as to the Greenwood County application
istrator said (R. 646) :
~ "Neither I, nor the Public Works Administration,
nor the United Stages Government, initiated or insti-
>
“ .
. eee
a
the loan and g
ahs ibe rar 3
‘ 20 /
gated or induced the making 6f onetiealnas for com-
petitive power projects. We did not%i in the pagfieular’
ease of Greenwood County.
The period of time elapsing between the filing of the
County’s application and the approval of the project in it-
self sufficiently refutes the idea that the Administrator had
urged or jvas hastening th@ construction of a plant to com-
pete with the petitioners. The application was made on
November 16, 1933, and was not approved until eight
" morfths,th thereafter, on July 19, 1934 (R. 267,,368, 370, 695).
Because of protests by the Duke Power Company which
the Publie Works Administration scrupulously gave ear
to (RK. 181, 363), no contract was entered into until Decem-
ber 8, 1934 (R. 513, 521), a period of another six months.
During all this time Greenwood County was the party that
was pressing for action (R. 687).°
A's denying’ the existence of petitioners’ coritended for
‘‘power poligy’’ in the Public Works Administration, these -
simple facts stand on a par with the previously discussed
showing of how comparatively little of the appropriations
for public works went to — power _—
County’ s Rates No Yardstick
- All of the facts discussed above, of course, go.to refute
petitioners’ bro sition that the Administrator in making
+ pie acting in furtherance of his policy
to’bring about a reduction of private utility rates. Peti- .
tioners, however, make the further contention that.regard- .
less of the existence or non-existence of this policy the
¢ffect of this loan and grant will be to set up a yardstick
for the fixing of private utility rates and for this reason
* alone must be considered jllegal. We -shall have more to
say as to the legal aspects of this argument below, ‘but it
is enough to point out at this time that the District Court
found as a fact that the rates charged by the Greenwood
County project could not be. used as a yardstick for rates
ch
7" «
charged by electrical utilities in South Carolina. There is,
‘the Court said (finding XX, R. 789), no logiftal compari-
‘. son possible between the factors necessarily used by the _
two plants in rate computation. The District Court’s find-
ing as to this is clearly sound and was held by the Circuit
Court to be amply supported ‘by the testimony (R. 858).
The Greenwood County plant would clearly have two com-
‘petitive advantages : (1) the fact that a portion. of its con-
struction’ cost came as a grant from the Federal Govern-
ment and (2) at least partial exemption from taxation. The
private ity ‘on the other hand would also have two ad-
vantages: (1) the fact that in a large system the overhead
cost per K.W.H. would be substantially less than in the .
small municipal plant and (2) freedom from the labor and
material provisions inthe PWA eontrackand resulting re-
duction in construction cost. Ae. 2
Petitioners’ witnesses. agree that there would be no.
“usable yardstick, Mr. Reed stating '(R. 565) that a compari-
son of the rates of the Greenwood County project with the —
rates of Duke- Power Company woyld be fallacious; as
does also Mr. Marshall (R. 179, 184)..
F Damage to Petitioners
Another Finding of Fact by the District Court pare we
should like to comment upon briefly is that concerned with
the alleged neetssity that- petitioners reduce thelr rates
throughout-their entire system to meet the competition in
Greenwood County. That finding (XXI, R. 789) is another
of those specifically approved by the Circuit Court of Ap-
peals (R. 858) andisas follows: ~
The testimony shows that at the most the Green-
wood County plant will produce about 25,000,000 K.W.
_H. Of this amount ‘the County has tentative plans to
sell about. 12,000,000 K.W.H. to parties who are now
_ eustomers of Duke Power Company. Duke Power Com-
‘ pany, in the Piedmont Section of the Carolinas i in 1936
e *
: =
— “Z . On ea eh > ‘
—_
22
sold 2,476, 000 000, K.W.H. The sicolciliacs their 1935
sales was over 380 000,000 K.W.H. Thus the loss of
12,000,000 K.W.H. to Greenwood County will amount
to only about 3% of the annual increase of the Duke
Power Company. From a practical standpoint, it is in- }
conceivable that this small competition would result, . =
under all of the evidence in this case, in a forced redue- | 4
tion throughout the entire Duke system. P é
In any event, the Duke Company in appearing be- ,
tows the South Carolina regulatory body with respect .
to its rates could show these pertinent facts in a very
definite manner. We do not conclude that the competi-
tion of the Greenwood County plant would necessarily
force the Duke Company to lower its rates throughout
‘ the system.
The evidence substantiates the finding that the loss by
Duke Power Company to the Greenwood County project
will not result in a general reduction of Buke Power Com-
pany’s rates. Plaintiffs’ Exhibit 18 (R. 340) lists the cus-
_ tomers of tke Duke Power fompany with whom Greenwood
County has made contracts and shows that Greenwood
County will sell to such present customers of Duke only
about 12,000,000 K.W.H. annually. It is not the County’s
intention to confine its sales of electricity to customers of
the petitioners, Mr. Davis saying (R.‘687) :
Greenwood County has not heretofore and does 4
not intend to confine its.efferts to selling power to Duke ;
Power Company customers alone. .Greenwood. County
hopes to sell the major part of its primary current out-
put to municipalities, rural sections and small indus-
tries in’ Greenwood, Newberry and Laurens Counties
and surplus primary and secondary to large industrial .
users. The undeveloped rural load in the three coun-
ties plus the developed industrial load in Greenwood ~
_ County, not now sold by Duke Power Company,. is
sufficient to liquidate loan at proposed rates.
Mr. Dunean’s testimony is to thie same effect (R. 694).
Mr. Davis states (R. 690) that ¢ enwood County will
not have generating capacity sufficient’ to take on many
Bs soy
DATs
Fi Eee
*
|
23
more large industrial customers and that it will be only
a comparatively short time before the municipal and rural
areas will begin to absorb the entire output of the plant.
He testifies that since the preparation .of plaintiffs’ Ex-
hibit 18, the County had obtained some prospective con-
tracts with one of Mr. Abney’s mills, which is not now
served by Duke. aoe
The field\of customers unsold by Duke Power Com-
pany is ample for the Greenwood project to’ sell all of its
power. Mr. Davis states (R. 313-314) that Duke furnishes
only 8% to 10% of the power used in Greenwood County. ;
In 1934 a cotton mill owner at Clinton, S. C., built a
steam plant and began to. furnish, power to former cus;
tomers of Duke (R. 313; defendants’ Exhibit 45, R. 430).
The loss of these customers, the City of Clinton, ,Clinton
Cotton Mills, Lydia Cotton Mills and Panola Cotton Mills, *
is admitted by petitioners’ witnesses, Marshall (R.181),and —
Reed (R. 563). The amount lost to: these customers was
about the same amount of business as the Greenwood Coun- |
by project will take from Duke (Reed’s testimony, R. 563).
Despite these losses, Duke Power Company is continuing
to do business and has not had to reduce its rates (R. 564).
Duke’s sales in 1936 were the highest in the history of
the system (Reed, R. 563; Nabow, R. 629; defendants’ Ex-
hibits 90 and 91, R. 734), being an increase over 1935 sales.
_of approximately 380,000,000 K.W.H., or sixteen times
Greenwood County’s maximum annual production of £25,-
000,000 K.W.H. (R. 565).
In the opinion of the County’s witnesses, Chapman,
Duncan, ‘and Sweeney, the construction of the Buzzard
Roost project and the sale by Greenwood County of all its
- available’ power will not materially affect the Duke Power
Company system (R. 668, 696, 698). ibaa
_° his opinion is substantiated by petitioners’ witness
Reed, who admitted that the proposed Buzzard Roost plant,
x ’ .
> ;
ee eee 2r = vette ne .
~
24
because of its small size, could not materially damage the
Duke Power Company in dollars and cents (R. 565).
We have not in this rather disjointed treatment of the
facts as established by the Courts below gone into all of
the factual elements of the case, but have confined ourselves
to the Findings most strongly contested by petitioners. and
which they must overcome before they can hope to succeed
in this appeal. We believe that we have demonstrated from
the Record how inevitable those findings are.
,
SUMMARY OF ARGUMENT
Since Greenwood County has full constitutional and
statutory aufhority to operate its plant in competition with
the Duke Power Company, the latter has no standing in
Court to investigate the source from which the County ob-
tains the funds to build the plant, and therefore. the, legality
of the Administrator’s action in making the loan and grant
does not present a justiciable controversy in this Court.
The Congress of the United States, under the provi-
sions of the General Welfare Clause, had’a right to allocate
funds to the several States, and their subdivisions, to be
used by them in a comprehensive program of public’ works
' in order to relieve national unemployment.
_ Title II of the Recovery Act in delegating to the Pres-
ident the powers to select individual projects to be included
in the. comprehensive program. under the standards ‘and
classifications set out in the Act did not violate the consti-
— tutional prohibition against the exercise of legislative pow-
er by the executive.
. The Congres having directed the President, through
the Administrator of Public Works, to include in the com-
prehensive program projects for the development .of water
power and for the transmission of electrical energy, the
Administrator and the President complied with the Act
when they allocated funds to Greenwood County for the
‘
«
eS eEEEeeoeorrrerroorooa—S>EPES>=EOWOO OOOO
.
25
a
-
construction, of a hydro-electric plant on the Saluda River
and for transmission lines to convey this electrical energy. |
Any incidental non-national effect which the Recovery
. Act may have or which this particular project may have, .
does not render the allocation of these funds illégal.
ARGUMENT ;
I
Petitioners have no Standing to Attack the Validity of the
Loan and Grant Agreement . ;
a
Both of the courts below, apart from their decisions in
favor of defendants on the constitutional questions in-’
volved, held that the determination of those questions was
not necessary, petitioners having no standing in court to
question the expenditure of federal funds, either upon the
ground that Title II of the National Industrial Recovery
Act is unconstitutional or upon the ground that the statute
has not been complied with. This holding is in accord with
that of every appellate court to which the question has been |
presented.* ae
It is elementary that before a party is entitled to ask
for any relief under our system of jurisprudence he must
show that he has a legal right that-has been invaded or ‘is
threatened with iftvasion by the acts of which he complains.
This Court has had occasion during the present term to re-
affirm this rule. In Ex Parte Albert Levitt, 82 L. Ed. 1, the
per curiam order contains the following language:
- It is an established principle that to entitle a pri-
vate individual to invoke the judicial power to deter-
mine the validity of executive or legislative action he
must show that he has sustained or is immediately in -
danger of sustaining a direct injury as the_result of
* The decisions of other Circuit Courts of Appeal are: Alabama
Power Co. v. Ickes (App. D. C.), 91 Fed. (2d), 303; Arkansas-Missouri
Power Company v. City of Kennett (C. C. A., 8th), 78 Fed. (2d), 911;
Allegan v. Consumers’ Power Company (C. C. A., 6th), 71 Fed. (2d), 477.
26 |
that action and it is not sufficient that he has merely
. a general interest common to all members of the pub-
lic. Tyler v. Judges of Court of Registration, 179 U.S.,
405, 406, 45 L. Ed., 252, 253, 21S. Ct., 206; Southern R.
Co. v. King, 217 U. S., 524; Newman» United States,
238 U. S., 537, 549, 550, 59 L. Ed., 1446, 1451, 1452,
39 S. Ct., 881: Fairchild v. Hughes, 258 U. .5., 126, 129,
66 L. Ed., 499, 504, 42 S. Ct., 274; Massachusetts v. Mel-
lon, 262 U. S., 447, 488, 67 L. Ed., 1078,. 1085, 43S. Ct.
597. (Italics supplied. )
We submit that the petitioners have not shown a direct
injury or invasion of a legal right by any act or combination
of acts on the part of the defendants. What they are really
complaining of is the creation of a situation containing po-
tential damage to their business—a situation made up of
two separate elements, (1) the undertaking by Greenwood |
County to engage in competition with them in the manufac-
ture and sale of electric power, and (2) the financing of this
competition by the. Public Works Administration through a
Joan and grant to the County. If neither the first elenient —
nor the second, nor a combination of the two constitutes an
- invasion of petitioners’ legal rights they clearly have no
standing i in Court. ; ‘
We do not believe that petitioners any longer seriously
- wquestion the legal right of Greenwood County to engage in
competition with them. The County.was given full power by
the Legislature of South Carolina (XXXVIIIS. C. Statutes
411, 1392, 1543; Appendix to Government’s Brief, pp. 46,
65) to build and operate a hydro-electric plant at Buzzard
Roost on the Saluda River; to sell the power in the three
counties of Greenwood, Newberry and Laurens; to receive
a gift of money from the United States; to borrow money
for the construction of this project and to issue revenue
bonds as security for the loan. The decision of the South
Carolina Supreme Court in Park v. Greenwood County, 174
S. C., 35, 176 8. E., 870, fully settled all questions of consti-
tutional and statutory power under state law.
27 . \
The right of Greenwood County to build its plant and
“ sell its power is not made less absolute by the fact that in
doing so it will compete with the petitioners: This Court has
held, in every case that has come before it involving an at-
tempt by a holder of a non-exclusive franchise (such as pe-
titioners have here) to avoid competition by a state or its
political subdivision, that property rights in a public utility _
‘plant or in a franchise did not include the right to be free™
from competition, but that competition even by the sove
ereignty giving the franchise was a risk which was accepted
’ by the private utility when it entered the field. Puget Sound .
Power and Light Co. v. City of Seattle, 291 U.S., 618; Ma-
dera Waterworks v. Madera, 228 U. 8., 454; City of Joplin
- v, Southwest Missouri Light Co., 191 U. 8., 150.
Given this undeniable right of the County to engage
‘in competition with petitioners and taking it to be equally
as well settled that an unauthorized expenditure of federal,
funds by the Administrator in itself gives petitioners no
right to complain (Mass. v. M ellon, 262 U. S., 447), it only
remains to consider petitionexs, contention that the combi- |
nation of the County’s conipetition and the Administrator’s
expenditure of federal funds constitutes a legal injury and
| gives them a standing ‘in Court. This contention is based
| upon the premise that petitioners’ position as public utili-
| ties with franchises from the State gives the right to be-
free from illegal competition and that competition aided -
by an unauthorized expenditure of federal funds by a fed-
eral officer is illegal. It is true that this Court has in the case
°° of Frost v. Corporation Commission, 278 U. S., 515, an-
nounced the rule that the holder of even a non-exclusive
franchise has the right to enjoy the use of that franchise
‘free from illegal competition and may appeal to the Courts
for protection when such competition threatens. The fallacy _
in petitioners’ attempted use of this principle lies in the
fact that the rule is prdéperly /and necessarily limited to
cases where the competition itSelf is illegal, 1.e., where it is
id
28 |
in violation of valid laws of the particular state that has
granted the franchise and prescribed the rights and duties
attaching to it. When the state has specifically said through
its Legislature and its highest Court, as South Carolina has
done in our case, that the competition is lawful, the doctrine
of Frost v. Corporation Commission and similar cases has
no application.
Damages directly resulting from lawful competition
are damnum absque injuria, even though that competition is
cansed or made possible by thajynlawful conduct of a third
person; Railroad Company v. Ellerman, 105 U. S., 166; Chi-
cago Junction Case, 264 U. S., 258; Sprunt & Son v. U. S.,
281 U. S8., 249.* The fact that the third party whose illegal
act aided the lawful competition happened to be a publie
officer does not alter the principle upon which the deci-
sions are based. To have any relief in the courts against
the actions of such an official it must first of all be shown
that his actions, disregarding their official nature, inflicted
a legal injury on the plaintiff: It would only be after that
determination that his official capacity would have any
bearing on the situation. oe
The damage suffered by Duke Power Compdny would
be the same regardless of where the money to build the
Counfy’s plant came from.,Let us suppose that instead of
being a cabinet officer making this loan and grant, as peti- .
tioners charge, in violation of the statute and Constitution,
the lender-were an embezzler and making the loan and grant
from federal funds which he had embezzled. Under thosé
circumstances petitioners’ legal injury—an injury suffered
in common with all other citizens because of the illegal use
of federal funds—could not be added to the damage result-
ing from the legal gompetition of the County so as to give
rise to-a cause of action. Petitioners’ injury from the Ad-
ministrator’s acts in the case at bar is of exactly the same
} * Since the Government’s Brief will undoubtedly contain a detailed ;
ny ad of these important cases, we shall not attempt any discussion
them
29
nature as in the case imagined. Neither in itself gives peti-
tioners standing to sue and neither makes out a cause of ac-
tion when combined with damage from legal competition.
* Petitioners cite such cases as Hitchman Coal and Coke
Company v. Mitchell, 245 U. S., 229; Truax v. Raich, 239 U.
S., 33; Hammer v. Dagenhart, 247 U.S., 251; and Pierce v.
Society of Sisters, 268 U.S., 510, as authority for the grant-
‘ing of :njunctive relief against the Administrator if it can be
shown that his illegal acts made possible the damage to the
petitioners even though the immediate cause of that dam-
age was the admittedly legal act of the County. An exam-
ination of these cases will show that in all of them the third
party against whose illegal acts relief was granted was in-
ducing the consummation of the damaging transaction by
fraud or intimidation with the direct and sole purpose of
causing damage to the petitioners. The touchstone of every |
decision in this line of eases is the element-of malicious in-
tent manifesting itself in a scheme or conspiracy to cause
_ directly the very damage complained of. No such element of
malice can possibly be found in the facts presented here. -
Even admitting that the evidence establishes all that the.
petitioners ask of it—that the Federal Government in mak-
ing loans and grants has been motivated by a purpose of re-
ducing private utility rates throughout the eountry—that
objective is far different i in the eyes of the law from mali-
cious intent to do harm to the petitioners.
‘The Distriet Court, while completely adopting in its
Conclusion of Law No. 7 the view that petitioners cannot
assert a cause of action based upon damages resulting
from lawful competition, such damages being damnum
absque injuria, held that petitioners would have a right to
relief if they could show a regulation of their intra-state
affairs by any agency other than the State of South Caro-
lina regardless of whether such regulation resulted in dam-
age to them or not. We do not agree with this theory of the
District Court that a Court of Equity can allow injunctive |
” 4
’
30
relief without a showing of substantial damages, either
suffered or immediately impending; but we submit that.
when the Court adopted this view and still did not grant pe-
titioners the relief they prayed, it gave an importance to its
finding that there wodld in fact be no regulation of petition- °
ers’ rates. by the Federal Government that such finding
could not otherwise have had. Petitioners,were put in the .
position of being able to sustain their case by showing mere-
ly that the situation would result in some type of regulation
by the Federal Government This they failed to do. By as-
suming a legal position as favorable as possible to petition-
ers upon their right to sue, the District Court threw open
the doors to the merits of petitioners’ ease. It allowed them
to go fully into the alleged Federal regulation and then with .
all the evidence before it and looking only for proof that
Federal regulation, even if harmless, might: result, the-
Court found a§ a fact that petitioners and their rates would
‘. not be subjected to any form of Federal regulation. by this
loan and grant to Greenwood County (R. 764, 870).
The Circuit Court of Ap veals refused to follow this
theory ‘of the District Court as to the right to sue and re-
ee Oe are Ne RM
o
_ iterated its former holding that the bill should have been
dismissed for lack of equity, adopting the simple and unas- °
_ sailable reasoning that (1) the county-violates no legal ’
right of the petitioners by competing with them; (2) the
Administrator violates no legal: right of petitioners in
_making loans and grants of public funds; and (3) there is
no principle ‘‘upon which action which violates no right
may be’ enjoined betause in aid of another action which ~
violates no right”’ - 870).
Notieeere
AY
a
- IL
The Enactment of Title II of the National Industrial Re-
covery Act ig Within the Powers of Congress
» . Under the General Welfare Clause
Since this litigation began, what was perhaps the most
important constitutional question originally presented was
definitely settled by this Court when it held in the case
of United States v. Butler, 297 U.S., 1, that the power of
.the National Congress to make appropriations urfder the
General Welfare Clause is not confined to those matters as
to which Congress is given the right under the Constitution
to legislate.-After this putting to rest of a nationgold con-
‘ troversy, the only questions as to the power of Congress
to enact Title II of the National Industrial Recovery Act
which remained open were whether the relief of unem-
ployment was in fact for the general welfare and whether
a program of public works construction was a proper
method for the relief of unemployment.
‘The first of these questions, at least, was settled during
the last term of this Court in the Social Security decisions ;
Steward Machine Co. v. Davis, 57 S. Ct., 883, Helvering v.
Davis, 57 S. Ct., 904, where it was held that the raising and
spending of funds for the relief of unemployment and for
benefits to the aged were proper exercises of the power of
Congress to levy taxes and make expenditures to promote
the general welfare. In the Steward case, the Court said:
During the years 1929 to 1936, when the country
was passing through a cyclical depression, the num-
ber of the unemployed mounted to unprecedented
‘heights. Often the average was more than 10 million ;
at times a peak was attained of 16 million or more.
Disaster to the breadwinner meant disaster to depend-
ents. Accordingly the roll of the unemployed, itself
formidable enough, was only a partial roll of the des-
titute or needy. The fact, developed quickly that the
_states were’ unable to give the requisite relief. The
¥
7 o 6
.
TOT eg? I RE Ament >
’
32
problem had become national in area and dimensions.
There was-need of help from the nation if the people
were not to starve. It is too late today foyghe argu-
ment to be heard with tolerance that in a.cfisis ‘so ex-
treme the use of“the moneys of the nation%to relieve
the unemployed and their dependents is a use for any
purpose narrower than the promotion of the general
welfare. Cf. United States v. Butler, 297 U.S., 1, 65, 66,
56 S. Ct., 312, 319, 80 L. Ed., 477, 102 A. L. R., 914;
Helvering v. Davis, 300 U. S., .., 57 S. Ct., 904, 81 L.
Hid., .., decided herewith. The nation responded to the
call of the distressed. Between January 1, 1933, and
July 1, 1936, the states (according to statistics sub-
mitted by the government) incurred obligations of
$689,291,802 for emergency relief; local subdivisions”
an additions] $775,675,366. In the same period the ob-
ligations for.emergency relief incurred by the national
government were -$2,929,307,125, or twice the obliga- .
tions of states and local agencies combined. According
to the President’s budget message for the fiscal year
1938 the national government expended for public
works and unemployment relief for .the three fiscal
years 1934, 1935, and 1936, the stupendous total of $8,-°
681 ,000,000.
Equally forceful language / ‘is found in the Helwcring
case where it is particularly pointed out that the discretion
necessarily existing in the determination of what appropri-
ations are for the general welfare as distinguished from«
local welfare is a discretion belonging to Congress and be- .
fore an exercise of Congress’ spending power can be found
by the Court to be unconstitutional there must be a showing
that by no reasonable possibility can the challenged legis-
‘lation fall within the wide range of discretion permitted to
the Congress.
It is interesting to note that the District Court rested
the constitutionality of Title II of the Recovery Act, at least
in part, upon a power broader and more fundamental
_ than that usually considered to be granted by the General
Welfare Clause, holding (R. 764-67) that appropriation of
A
“D 33 | ae
monies by the Federal Government to subdivisions of stbhes
for the construction of public works is justified by the —
power, inherent.in the very nature of our dual form of gov-
ernment, of one sovereignty to aid another. It is certainly
true that this Court in the Social Security. cases upheld
the right of Federal and State Governments to deal with
each other as sovereigns in coping ‘with problems com-
mon to both which neither could effectually meet alone, and
~whether or not it was intended to state this power as one
distinct from that given to the Federal Government by the
General Welfare Clause, the deéisions have added im-
measurably to our concept of, the sovereignty of both Fed-
eral and State Government.
| There remains, then, only the equation as to on
admitting the power of Congress under the General Wel-
fare Clause to relieve nation-wide unemployment, appro-
priations for the construction of public works throughout
the nation is a proper form for such relief to take. The idea
of a program of public works as a means of alleviating un-
employment is, of course, not novel, it having been accepted
by economists and political philosophers since the days of
Pericles as perhaps the most practical method of giving .
work to those who need it and obtaining at the same time
something of lasting value to all. Congress, realizing, as .
other Congresses and other Administrations had done be-
fore, that such a program would increase employment not
-only in the actual construction of the project but in all
industries connected with the production and transporta-
tion of materials, seized upon. this historic method as being
as appropriate a weapon against unemployment. as was
available to it. The results have justified Congress’ hope.
Defendants’ Exhibit 76, a Department of Labor peaeennes
entitled ‘‘Employment Created by PWA Construction”’,
which is being sent up with the. Record, contains Sndinis
by the Bureau of Labor Statistics that the-activity of the
_Public Works Administration had resulted by — 1936,
“PEL SE RAT PE te ae: oe 4
f
34
in the employment of approximately 6,475 man-months of
labor: Ht is stated as a conservative estimate that for each
person put to work at the site of the projects 214 additional
persons were given employment away from the site.
Petitioners* position as to the unconstitutionality of
*Congress’ authorizing the construction of public works for
the relief of unemployment comes simply to saying that
since each separate project is local in it? nature, the pro-
gram cannot’ be for the general welfare. In Title II of the
_National Industrial Recovery Act Congress did not at-
tempt to make appropriation for any individual project,
the appropriation being instead for “a comprehensive pro-
gram of public works.’’ The construction of individual proj-
ects might be,-when taken by themselves, of only local bene-
fit but the program as a whole is for the benefit of the na-
‘tion. Thevrelief of unemployment, to have any national
effect must necessarily be aecomplished in unconnected lo-,
calities by’ putting’ unconnected individuals back to work.
Petitioners seem to argue further, that the program
of. publie works authorized by the Act is not for the general
welfare because the uses of the various projects after con-
struction will be for the benefit of the. localities where they
are situated. ‘The purpose of Congress in providing for a
“ comprehensive program of public works is fulfilled in the
construction of the projects so as to provide for an increase
in employment. The use after construction was not within
the purview of the Act and the fact that incidental local
benefits: will result through the use of the projects cannot
affect the fundamental fact that Federal aid in their con-
struction is part of a comprehensive national program of
public works 7 — to, promote the gen-
eral welfare.*
*In saying ‘that Congress, being ~— engaged: in relieving
‘unemployment, was not interested in the local benefits derived from
the use of the ptblic works, we are not implying a belief that a consid-
eration of such local incidental benefits or a manifest desire for them ‘by
- Congress would make the _ any the less constitutional. The greatest
——
——
39
There is no justification for petitioners’ argument that
Title II. is beyond the powers of Congress because power
plants which might compete with those of private industry
are included in the list. of projects eligible for loans and
grants. The determination of the type of project desired was
naturally left by Congress to the applicant. Whether or not |
a competitive power plant was desirable was a question of
policy for the state government to decide. Greenwood.
County wanted such a plant and the. Legislature of South
Carolina has determined that it is proper for the county to
have and operate such a plant. We do not believe that Con-
gress would have been justified in saying to us that. we
could not have a power plant because of possible competi-
tion with private utilities and that since we did not need
-or desire any other type of project we could have no. part ,
at all in the public works program.
; In the list of eligible projects contained in Title II, no
emphasis is given to competitive power plants or any other
type of-competitive projects. Certainly it cannot be said
that a simple refusal by Congress to exclude power proj-.
ects from this-list makes the Act unconstitutional.
ITI.
The Aid Given by the Federal Government to Greenwood
County is Within the Powers of Congress Under
| the Commerce Clause
Although our fundamental position is that Congress
has validly authorized the making of this loan and grant
under the General Welfare Clause of the Constitution and
the Courts below have passed only upon this power, we be-
lieve that this particular loan and grant has, in addition,
advantage of a pro of public works ever other systems of unem-
loyment relief is the accomplishment of permanent local .benefits, and
it cannot be said that in order to pass a valid Act Congress had to close
its eyes to this advantage. The Federal Government can: manifest the
cooperation with state sovereignties approved by this Court in the Social
Security cases in no more salutary manner than by aiding the states and
their sub-divisions in the acquisition of much-needed public works.
o@
36
constitutional validity under the Commerce Clause as an
aid to navigation.
' Although the Saluda River at the point where the Buz-
zard: Roost dam will be built.is not accessible to water
craft from the sea, the flow of the river at this point does
affect the navigability of the Congaree-Santee system (R.
400-402). |
The Federal ‘Power: Commission which has vines
to act only upon a showing that the navigability of rivers.“
affects interstate commerce (16 U.S. C. A., 797), has found
that the project here does affect interstate commerce (R.
‘ 400). The determination by the Federal Power Commis-
sion of this question of fact. is conclusive.
Morgan v. U. S., 298 U.S., 468.
This Court has frequently confirmed Congress’ right
to control the flow of water in streams which affect naviga-
tion, even though the stream at the point involved is not
actually navigable. ;
U. S. v. Rio Grande vow & Irrigation Co., 174 U.
S., 690.
Egan v. Hart, 165 U. S., 188.
New Jersey v. New York, 283 U.S., 336.
That purposes other than navigation, will also be
served in the construction of the dam is immaterial.
Arizona v. California, 283 U.S8., 423.
>
Title II of the National Industrial Recovery “Act Does
Not Violate the Tenth Amendment
. Petitioners argue their contention that Title II in-
fringes upon the reserved rights of the state and violates
the Tenth Amendment as a proposition separate and dis-
tinct from the fundamental question of Congress’ powers
under the General Welfare Clause. To us their position
that the statute intrudes upon ‘the réserved rights of the
O
7
“y
37.
state is simply the converse of their position that no con-
stitutional power exists for the enactment. If a particular
power is found to have been delegated by the Constitution
to the Federal Government, the Tenth Amendment by its
very language has no application: This view seems to us
to be supported by the Court’s treatment of the constitu.
tional questions in the Social Security cases, particularly
_ Helvering v. Davis, supra. This separation of approaches
to what should be the same basic inquiry may itself be
taken to demonstrate the fallacy inherent in petitioners’
argument.. Not being able to find any invalidity in what
Congress has done by regarding the Act itself with its
undeniably legitimate purpose, petitioners find it neces- |
sary to go further and argue that unconstitutionality is es-
tablished because of collateral and indirect effects of the
legislation. They are contending that, even if this Court
finds ample authority under the Constitution for Congress
to have enacted Title II of the National Industrial Re-
covery Act, that power must be disregarded and considered
as non-existent if the Statute can be shown in some aspects
of its application to have the effect of regulating matters
non-federal in character; and this although the instances
involving alleged regulation are infinitesimal in proportion
to other applications of the statute.
We submit that there is no authority for such position.
When the power of Congress to enact a particular law can
be pointed out in the Constitution the fact that the ‘inci-
dental effect of the legislation might be beyond the scope. of
the Government’s enumerated powers does not invalidate
the law. Petitioners have cited on page 55 of their brief the
eases of Collins v. New Hampshire, 171 U. S., 30, and Ham-
mer v. Dagenhart, 247 U.S., 251, for the rule that the pur-
pose of an act of Congress ‘‘must be determined by its
- natural and reasonable effect.’’ They cannot seriously be
contending that the natural and reasonable effect of the
comprehensive statute we are considering is to regulate.
ea
38
their electric rates in South Carolina. They have never
even argued that the underlying purpose of Congress in
enacting Title II of the National Industrial Reeovery Act
was to force them to reduce their rates.
Collateral Effects Cannot Invalidate Statute
We understand the well-settled rule of constitutional
interpretation to be that where a statute itself contains
no regulatory provisions the Court will not condemn it as
violative of the Tenth Amendment even if its collateral
effeet is the regulation of intrastate activities. This prin-
ciple has been established in a long line of cases, has never —
been denied or questioned hy any decision of this Court
_and has been recently re-stated and re-affirmed in the case ~
' of Sonzmsky v. United States, 300 Ut 8., 506. The petitioner
there contended that the tax imposed bythe National Fire
Arms Act, the violation of which:he was convicted of was
not a true tax but a penalty imposed for the purpose of
regulating trafiic in fire arms, the local regulation of which
“~ reserved to the states under the Tenth Amendment. This
Court in a unanimous opinion held that the tax was valid
as an exercise of a proper Congressional power and that
it could not consider whether it operated as a regulation or
was intended by Congress as a regulation of matters be-
-yond the Congress’ power.
The Court, in reviewing the authorities, demonstrated
that there were two separate lines of decisions necessitat-
ing different approaches—one, exemplified by the Child La-
bor Tax Cases, 295 U.S., 20, Hill v. Wallace, 259 U. S., 44,
and Carter v. Carter Coal Co., 298 U. S., 238, holding that
where a statute although purporting to be-passed under an
admitted federal power such as the taxing power, actually
contained provisions regulating or authorizing the regula-
tion of intrastate activity, it must be condemned as viola-
tiveof the Tenth Amendment; the other, holding that where
eee
.
39
a statute comes within proper Congrss:ional power and
contains on its face no regulatory provisions, it will not be
stricken down even though its collateral and incidental ef-
fect will be to accomplish something which Congress has no
power under the Constitution.to accomplish directly. As ex-
amples of the latter line of décisions the Court cites Veazie
Bank v. Fenno, 8 Wall., 533; U. S. v. Doremus, 249 U. S.,
86; McCray v..U. S., 195 U. S., 27; Smith v. Kansas City
Title Co., 255 U. S., 180; Arizona v. California, 283 U. S.,
423; Hampton & Co. v. U.S., 276 U.S., 394.
In some of these cases, notably Hampton & Co. v. Uz
S., and Smith v. Kansas City Title Co.; it will be found that
the rule was applied, although Congress had declared in the —
Act that it had a desire for the collateral result. .
The case of U. S. v. Butler, 297 U. S., 1, relied on al- —
most exclusively by the petitioners in their argument as to
violation of the Tenth Amendment, when examined is found .
to be of that class of cases dealing with statutes which them-.
selves contain explicit provisions authorizing the regula-
tion of intrastate activities.’"The Court, in the Butler case,
held that the tax resisted was an incident of a statutory
plan for regulating agricultural production, which statu-
tory plan invaded the reserved rights of the states. The
Agricultural Adjustment Act showed a direct purpose on
the part of Congress to regulate, the plan for the regula-
tion and control of intrastate avtivities appearing clearly |
- throughout the statute.
On the other hand, in Title II of the National Indus-
trial Recovery Act there is no provision at all regulating
or authorizing the regulation of intrastate rates. There is
- no indication in the Act that Congress desired Or even an-
ticipated that régulation:of intrastate rates would result.
If such regulation does in fact occur, it will be a collateral
or incidental, result of the operation of the statute so as to
come within the rule applied in the Sonzinsky case rather
than within the rule applied in the- Butler case.
40 .
It is clear that Congress in enacting Title II had no
purpose to regulate petitioners’ rates, nor, we submit, was
there present even a purpose to cause competition to the
petitioners. The competition will be purely an incidental
consequence of Congress’ primary purpose, the promotion |
of the general welfare by increased employment. The only
way that Congress could have avoided the incidental effect
would have been to provide that no loans and grants could
be made where competition with private industry might re-
sult. This it refused to do, and wisely, because it is clear
that such-a provision would have almost completely nulli-
fied the program. Not only, to avoid competition with pri-
vate industry, would Congress have had to deny loans and
grants for power projects, but other types of projects
would have had limited. It is difficult to imagine any .
type of useful project which might not offer competition to
an established private enterprise. Public hospitals would
compete with private hospitals; public schools with private
schools; public swimming pools with private swimming
pools; publicly owned bridges with private toll bridges, and
so on through the entire list. States and municipalities
would have found it difficult, if not impossible, to select
projects which they desired and which they were willing to
borrow money in order to possess. It seems to us an unwar-
rantable proposition that the mere fact that Congress per-
mitted the making of loans and grants for competitive
power projects could invalidate the Congressional Act.
Regulation is Illusory
We have argued that the collateral or incidental ef-
fects of the Federal Statute, even if those effects were a
regulation of intrastate rates, would not invalidate the
statute. It is our position, however, that Title II cannot be
said to have even the incidental effect of regulating the pe-
; titioners’ rates. It is true ‘that the construction of the
41
Greenwood County project will result in competition to the
Duke Power Company although the evidence shows that the
competition from this small. hydro-electric project will be
of no great importance. Such competition is, we submit, not
regulation in any sense and certainly not in the sense of
regulation in violation of the Tenth Amendment. The only
actual regulation of petitioners’ rates possible in South
Carolina is regulation by the State. The Federal Govern-
ment does not have in South Carolina, and cannot have as
long as our system of dual sovereignty exists, any system
or machinery whereby it could regulate intrastate rates
even if it desired to do, so. Its rights under the existing loan
and grant agreement with the county; as we have demon-
strated and as we believe petitioners admit, certainly give
it no such right of regulation.
_The State of South Carolina has client its power to
regulate the petitioners’ rates to’a state agency, the South
Carolina Public Utilities Commission, which has the power
to apply any just standard that it desires to the petitioners’
rates to, determine whether or not they are proper. If the
yardstick which petitioners claim will be afforded. by the
rates of Greenwood County is in fact a just yardstick, meas-
uring exactly 36 inches, petitioners cannot complain of its
application by the Commission. If, however, as the two
Courts below have found, the rates of Greenwood County
do not constitute a just yardstick on account of the en-
tirely dissimilar nature of the financial and political setup
of the two systems, the Public Utilities Commission will not
use it. In neither case can plaintiffs be damaged.
Since Commissions and Courts in fixing utility rates
take into consideration reproduction cost, and since Green- ”
wood’s econstructien contracts will be public records, it-may
be that the South Carolina Public Service Commission will
obtain from the Greenwood records certain information as
to the cost of items which go into electric utility construc-
tion. Similar information, however, would be available to
;
42
, a
the Public Service Commission whether the plant-were built
in the United States or in a foreign country, and a private
‘utility cannot complain because the Public Service Commis-:
sion obtains correct information about construction costs.
_We insist that competition is not regulation, but even
if we accept petitioners’ position ‘that the competition here
does amount to regulation, we think it is clear that such
regulation will be regulation by the State of South Car-
olina and its sub-division, Greenwood County. The Federal
Government will have absolutely no right to control or
regulate the operation of the rates of the Greenwood County
_ plant. Such control and regulation is in Greenwood County,
subject to the general powers of the State Legislature. The
State, through its sub-division, will be doing only those
things which it has always had a right to do and petitioners -
have no more right now to complain of the doing of those-
things than they have always had. If, as petitioners con-
tend, the rates of the Greenwood County plant are to be
used as a yardstick to apply to their rates, the yardstick
will be a State. yardstick and one which the State ha, al-
ways had ~ wieiae to use.
The Statute Involves’ no Coercion of the Sovereignty
of the State
Petitioners’ argument is that the State by the accept-
ance through its subdivision, Greenwood County, of Fed-
eral funds for the financing of the proposed project has
been coerced into giving up matters properly within its eXx-
elusive control. Authority for this position is sought from
the case of United States v. Butler, supra, where this. Court
held as violative of the Tenth Amendment ‘‘a scheme for
purehasing with federal funds submission to federal regu-
lation of a subject reserved to the states:’’ The difference.
between the coercion found to exist in the Butler case and
the elements of our case alleged by plaintiffs to show co-
43
‘ ercion are obvious. Under the Agricultural Adjustment Act
the Federal Government was found to be giving money to
private persons for the purpose of controlling matters
properly under state control, This was being done without
the consent of the state and very possibly in direct opposi-
tion to state policy. The Administrator’s actions in. our
case do not in any sense restrict the powers of the state
but only furnish to the state means of exercising a power
that has always existed. It cannot be said that the state’s
power is encroached upon by the giving or accepting of
financial aid in the furtherance of a declared state policy.
The State did not accept the loan and grant under any
compulsion or coercion. It knew that federal monies for
the construction of -public works were available to it if it
could satisfy certain conditions, but it was purely a matter
of choice for the state, or its subdivision as to whether it
would avail itself of a loan and grant from these funds for
construction of a public works project. It was also a mat-.
ter of choice for the state as to what type of project it
desired. .
We of the County submit; and the evidence in this con-
nection is uncontradicted, that it was Greenwood County’s
. desire for a hydro-electric plant, uninspired by any fed-
eral agency, that led to the application and that it was
’ Greenwood County’s perseverance that led to the allotment.
Our volition has never been swayed or attempted to be
swayed by any word or act of a federal employee.
Furthermore, neither Greenwood County nor the State
of South Carolina has giveg up anything as a result of
Title II or as a result of the Administrator’s acts. The con-
trol of rates remains in the sovereignty of the State of
South Carolina where it has always been. This control goes
not only to the rates of Duke Power Company, but also to
the rates of the municipal plant. That the South Carolina
Legislature can control County government and all matters
“ .
4 |
2
44
connected therewith throughout the state is a doctrine well
preserved by our South Carolina Courts.
'-Park v. Greenwood County, 174 S. C., 35, 176 S.
E., 870, *
Heslep v. State Highwey Department, 171 S. C.,
186, 171 S. E., 913..
Duke Powér Company v. Bell, 156 S. C., 299, 152
S. E., 865:
Although at the present time rates charged by govern-
mental subdivisions maintaining public utilities are not
controlled ‘by the Public Service Commission of the staté,.
there is nothing in our State Constitution or in any of the.
decisions of our highest Court indicating that the Legisla-
-- ture cannot put such ‘rates within the jurisdiction of the
Public Service Commission or supervise them in any man-
ner it sees fit.
1 McQuillin, Municipal cians 642, Sec. 251.
27 R. C. L., 1442, See. 59.
There was presented to us no choice of yielding or suf-
fering ruin as was found:by this Court in the Butler deci- -
sion to have been offered to the farmers under the Agricul-
4 tural Adjustment Act. The langnage of Mr. Justice Suther-
land in Massachusetts v. Mellon, 262 U. S., 482, is applica-
ble in this connection:
Nor does the statute require the states to do or
yield anything. If Congress enacted it with the ulte-
rior purpose of tempting them to yield that purpose —
1 may be effectively frustrated ads the simple expedient
of not yielding. ,
Even more to the point is the opinion of this Court in
the recent case of Steward Machine Company v. Davis, su-
pra, where the argument that the sovereignty of individual
' states was being relinquished in exchange for benefits of-
fered by federal statute was capable of a much stronger
presentation than it is in the case at bar. Under Title LX of
the Social Security Act the states were in effect given their
.
°° ©
45
choice of creating a state unemployment compensation fund a
or seejng all of the tax imposed by the federal statute go to .
the federal fund. In our case the decision by the state not
to apply for a federal loan and grant would involve no dis-
advantage other than not possessing the completed plant,
with the accompanying financial obligations. In other words,
South Carolina under Title II of the National Industrial
Recovery Act had the choice of getting something which |
they did not have or of keeping what they had. The states
under Title IX of the Social Security Act were given the -
far more urgent choice of getting something or of giving up
something which they had.
- The Cireuit Court of Appeals thus discusses the effect
of the Steward case upon the Tenth Amendment argument
presented by the petitioners here (R. 861):
Likewise, our conclusion that the statute cannot
be condemned és an invasion of the reserved powers
_of the states is fortified by the decision: in Steward
Mach. Co. v. Davis, supra, wherein the Court said that
.. before a statute could be’ condemned on this ground
there must be a showing that the things which it au-
thorizes are ‘‘weapons of coercion, destroying’ or im-' ~
pairing the aatonomy of the “states,*.57 8. Ct., 890.
The carrying out of the program of ‘public. works au-
thorized by the statute for the relief of unemployment
cannot possibly have this effect; and, specifically, the -
making of loans and grants to municipal corporatyons
to enable them to engage in enterprises which the States
have ‘authorized them to engage in cannot, in any use’
of language, be said to abridge. or invade the powers of
the states. As we said in our former opinion, ‘It is an
entirely different thing from giving or lending money
‘to private persons for the purpose of defeating a state
policy or regulating matters under state control.’’ Any.
effect which such loans and grants may have upon rates
will be incidental to the competition engendered by the
construction of the projects; and where the state itself
authorizes the projects and the procuring of the loans
and grants for their construction, as did South Caro-
>
SEYRET - atte
46
lina in this case (Park'v. Greenwood County, supra),
- and retains the right of regulating the rates through °,
the exercise of state power, it cannot be contended with —
any show of reason that the power of the state is en-
eroached upon by the making of the loans and grants.
_or by the competition resulting from the construction
of the projects which they make possible:
V.
There is in Title II no Unlawful Delegation of Legislative
Power to the Executive
The authority conferred by Title II of the National In-
dustrial Recovery Act upon the President and the Adminis-
‘trator of Public Works is not such delegation of legisla-
tive power to a branch of the executive as was condemned
- by this Court i in the case of Panama Refining Co. v. Ryan,
293 U. S., 388, and Schecter Bros. v. U. S., 295 U.S., 495.
‘The standard laid down in the Panama Refining Com-.
. pany case, following the established precedents of Hamp-
- ton v. U. 8., 276 U. S., 395, and Field v. Clark, 143 U. S.,
649, may be found in‘the following language:
Accordingly we look to the statute to see whether
_ the Congress has declared a policy with respect to that
subject; whether the Congress has set up a standard
for the President’s action; whether the Congress has
required any finding by the President, in the exercise .
_ of the authority to enact the prohibition.
In the statute contested here the policy of the Congress Be
to provide a comprehensive program of public works for
the relief of unemployment could be no more clearly stated. —
In Sections 202 and 203 we find ample standards to guide
the President in making his allocations. Various classes of
_ eligible projects are enumerated and the President and Ad- .
’ ministrator are required to find in the making of each loan
that it will increase-employment quickly and that the.
United States Government will be reasonably secured in it.
' That it was necessary for the — to _— in ad-
~~
47
ministrative officers certain discretion in the approving of |
particular projects is obvious. It would have been i impossi- .
ble for Congress in 1933 .to determine which of the thou-
sands of applications should be granted, regarding in each
case the legal and financial soundness. The rule is well es-
tablished that the necessities of the case will justify leaving
a broad discretion in administrative officers.
Butterfield v. Stranahan, 192 U.8., 470.
Union Bridge Co. v. U. S., 204 U. 8., 364.
Monongahela Bridge v. U. 8.,216 U. S., 177.
This rule was recognized in both the Schecter and the
Panama Refining Company cases.
_ The recent decision of: Cincinnati Soap Company v.
United States, 301 U. S., 308, is in itself almost a complete
. answer to petitioners’ argument as to delegation of legisla-
tive power. There Congress had provided for the payment
to the Philippine Government of the -proceeds of a tax
levied on the processing of Philippine. coconut oil without
placing any restrictions upon the use by the Philippine Gov-
ernment of the funds paid over to it. Mr. Justice Suther-
land, speaking for the whole Court, said:
The validity of the act disposing of the tax is also
attacked as constituting an unlawful delegation of leg-
islative power. That Congress has wide discretion in
the matter of prescribing details of expenditures for
which it appropriates must, of course, be plain. Appro-
priation and other acts of Congress: are repléte with in-
stances.of general appropriations of large amounts, to
be allotted and expended as directed by designated gov-
ernment ageficies. A striking and pertinent example
is afforded by-the Acttof June 17, 1902, c. 1093, 33Stat.,
388, where all moneys received from the sale and dis-
t
‘
posal of public lands in a large number of states and -
territories are set aside as a special fund to. be ex- .
pended for the reclamation of arid and semi-arid lands
within those states and territories. The expenditures
are to be made under the direction of the Secretary
of the Interior upon such projects as he may deter- |
cr f
“ud > P ?
. ‘
OARS eR Nera een Ste ep mene . —
mag ee SLEEP Ng NAEP UR NNU ORRIN NTS ah tl Nc PSO RR
48
mine to be practicable and advisable. The constitution-
ality of this delegation of authority has never been
seriously questioned. See United States v..Hanson, 167
-Fed., 881, 884-885.
Even if it could be said that the ee? Recovery Act
did not provide sufficiently definite standards. for -the ac-
tions of the Administrator and gave to him legislative
power, Congress: by subsequent enactments has so adopted.
the previous administrative interpretation of the Act as to
s _provide adequate standards to guide the Administrator in
his future expenditures:
Pursuant to Senate Resolution 190, the, Administrator
furnished to the Senate a document, Defendants’ Exhibit
70, giving an account of his stewardship to date, setting out
clearly the policies of the PWA, its organization, the pro-
cedure used in handling allotments, the standards applied,
and a list showing the approved projects.
Thereafter Congress enacted the Emergency Appro-
priation Act, Fiscal year 1935 (Appendix to Government’s
Brief, p. 24), autharizing expenditures of $500,000;000.00
for public works under Title II. On April 8, 1935, Congress
enacted the Emergency Relief Appropriation Act of, 1935
(Appendix to~ Government’ s Brief, p. 26), which con--
tinued the existence of the Public Works Administration
and authorized the continuance of its functions. On June
22, 1936, Congress passed the First Deficiency Appropria-
tion Act, Fiscal year 1936 (Appendix to Government’s
Brief, p. 37), by which the: Public Works Admiristration
was authorized to spend $300,000,000.00 for the making of
loans and grants ‘‘of the kind and character for which the
_-/ ° Federal Emergency Administration of Public Works has
heretofore made loans and grants pursuant to Title IT of the
.. “- National Industrial Recovery Act or the Emergency Relief
ae Appropriation Act of 1935.’’
This continuation by the onion: of the functions of
the Publie Works Administration, with the facts.as to what
ee SII IIREN BESSON LRN LIG ED OT AOE RAY BOGS GLY ASEM Ht SE BNE ATMS OIG NI SES Re SEERA IR PE PAR TOROTAS ey
zw Sudo he Sa - =: sate fo a all . = > wie t9
arte mae mare ne men es Qe a rn een em re ne cen ree = me
49
the Administration was doing fully before it, amounts to
complete ratification of the acts of the Administrator and
the adoption by Congress as proper of the standards and
' procedure used by the Administrator.
It is to be noted that the 1936 statute particularly rati-
fied the Greenwood County project.
For legal authority as to the effect of these subsequent
ratifications and adoption by Congress of what has been
done by the executive, it is necessary only to cite the two
recent cases of Isbrandsten-Moller Co. v. U. 8., 300 U. S.,
139, and Swayne & Hoyt, etc., Co. v. U. S., 81 L. Ed., 400.
VI.
In Making the Loan and Grant to Greenwood County the
Administrator is Not Violating the Statute
Petitioners’ argument as to the alleged violation of the
statute by the Administrator stresses only slightly the con-
_ tention which actually should be the whole of their argu-
ment as to the Administrator’s actions; 7. ¢., that Title I
of the National Industrial Recovery Act does not authorize
the making of loans and grants to aid in the construction of
electric plants which will compete with private enterprise.
Title II does clearly authorize the making of the loan
and grant here contested. The construction of hydro-elec-
tric projects is clearly facluded within the enumeration of
the items that by Section 202 of the Act make up the. com-
prehensive program. The legislative history of the Act dis-
closes that Congress intended to include within the program
projects of the type here involved (77 Congressional Ree-
ord, 5°53; Appendix to Government’ s Brief, iste 78 et
seq.).
The Administrative interpretation of the Act and the
fact that within the program was included numerous hydro-
electric projects in territories where private utilities were
serving was brought to the notice of Congress by Reports
50
: ~
of the Administrator (Defendants’ Exhibits 70, 71, 72, 73
and 74). With this knowledge, Congress made further ap-
propriations for and continued the functioning of the Pub-
lie Works Administration in three consecutive years, as we
pointed out under V above. |
In enacting the Emergency Relief Appropriation Act
of 1935, Congress rejected a proposal to limit public works
projects to those which would be non-competitive with >ri-
vate ——— (Appendix to Government’s Brief, p.
78).
* In the First Deficiency Appropriation Act, Fiscal year
1936, Congress made special provision to insure that mu-
nicipal power projects involved in litigation would not be
defeated by a lapse of time (Appendix to Government’s
. Brief, p. 38).
It is undeniable then that the ndcdulbbentae 4 is acting
. within the express authority of the statute when he makes
a loan and grant for-the construction of a municipal power
plant. What petitioners say, however, is that regardless of
the clear authority under the statute for the Administrator
to do just what he has’ done here, if he has made this loan
and grant looking to a reduction of petitioners’ rates, the
loan and grant is invalid. Although they admit that the |
leged regulation and that this effect would ordinarily fol-
low the making of the loan and grant regardless of. the pur-
peses or policies behind its making, they take the position
that if the reduction of private utility rates is desired by
the Administrator, is planned by hin, is a part of his broad
- policy or is used as a criterion in passing on ———,
- that in itself makes his action illegal.
This contention that an improper motive or desire ac-
companied the doing by the Administrator of an authorized
act so as to invalidate the act was met by the Circuit Court
of Appeals on three separate grounds. The Court said:
~ effect of the loan and grant is what will accomplish their al-'
ol
There are several answers to this, each of which
‘seems to us to be complete and final.
_ In the first place, the Court below has found, and
the finding is supported by evidence, that the Admin-
istrator was not actuated by such motive in making the
—_ and grant to the County. * * * (R. 866).
In the second place, the Administrator in selecting
projects to which loans and grants are to be made un-
der the statute must necessarily exercise an adminis-
trative discretion, so as to extend aid ta projects which
are financially sound and the construction of which will
be in the public interest. If, in exercising this discre-
tion, he adopts the policy of not making loans and
grants for municipal projects which will not provide
rates to the public lower than competing private enter-
prises, such policy would seem to accord both with
sound finance and with the requirements of justice to
existing enterprises (R. 866).
* * *
In the third place, even if the Administrator had
the motive attributed to him by plaintiffs, and even if
this be an improper motive, the validity of his action is
not affected thereby (R. 867).
Since we have gone rather fully under our Dimes
of Facts, above, into the evidence supporting the District
Court’s finding that the Administrator in making the loan
and grant to Greenwood County had no purpose other than
that of relieving unemployment through the construction
of useful public works, we do not consider any further dis- -
cussion of the facts establishing this to be necessary. We
do not believe that all the ‘testimony brought forward by
the petitioners to show that the.Administrator is using his
office for the accomplishment of his ‘personal desire to re-
duce utility rates can even tend to refute the combination
of two simple and uncontradicted facts: (1) that the allot-
ment to Greenwood County was obtained only after
vigorous and persiatent efforts ad the County, and (2) om
b ; ; bd
sec Agee — iaiiae
= ir aa
- 52
of the entire number of Public Works projects approved by
the Administrator only 98/100 of 1% have been competi-
tive power projects.
We further believe that the Cireuit Court of Appeals’
second answer to the petitioners’ argument as to improper
' motives is sound, although neither we of the County nor
counsel for the government argued this view in the Courts
_below.. We have shown that the Administrator had of ne-
cessity very broad discretion in approving applications
for public works projects. There were many applications
for power projects and not all of them could be approved. °
If the construction of two projects would equally create
employment, if the loans to both would be equally secure,
and if the other statutory requirements. were met in both
eases and the Administrator must still choose between
_them, he would naturally give the project to the community
\ in which it would do the most good. The determination of
which project would be of the greatest and most lasting
benefit to the citizens of the community would in most cases
rest upon whether the proposed municipal plant would give
rates lower than those then being provided by private
utilities. As Judge Parker said in his opinion:
_ * * © There is nothing in law or common sense which
requires the Administrator to ignore such considera-
tions in the exercise of the discretion reposed in him.
Congress could certainly have provided that no loans —
or grants should be made under the Act to a municipal
enterprise in cases where an existing private enter-
prise was furnishing service to the public as cheaply .
as the municipal enterprise would furnish it; and we
see no reason why such criterion may not and should
not be adopted by the Adntinistrator. He is not re-
quired to select the projects on his program by lot or
_ to close his eyes to the interests of the public or the
social desirability of projects among which he must
choose. * * * | ;
pene roy wig cents patos ib niptiniesasi rhe eiarabeiera aie 2 henner
SER EG RN RE pe ne = RR ae ane ae ttn jo
53
‘What. petitioners are really saying is that the Admin-
istrator would never be justified in making a loan and grant
for a publicly owned power plant if any competition with
private industry would result. Competition and resulting
damage to private business could not be avoided by the
Administrator if he were to carry out the Public Works
program as it was intended. Conceivably almost any use-
ful project desired by an applicant might result in compe-
tition for some industry. For him arbitrarily to have re-
fused allotments where there was danger of competition
would have caused the collapse of the Act’s administration
and thwarted Congress’ purposes to relieve unemployment.
Petitioners in that section of their Brief beginning on
page 38, give the impression that the Administrator was
free under Title II to make up the Comprehensive Program
of Public Works of whatever types of projects he saw fit
and that, it was in the exercise of his own discretion that
power plants were included among the projects for which
loans and grants were available. This position is unjustified
since the Administrator was specifically instructed by the
Act to make loans and grants for projects of the type in-
volved here. |
Section 203-(a) of Title IT (Appendix to Government’s
Brief, page 4) provides:
With a view to increasing. employment quickly
_* © * the President is authorized * * * to
construct, finance or aid in the construction or firianc-
ing of any public-works project included in the pro-
- gram prepared pursuant to Section 202 * * *.
‘Section 202 of Title II (Appendix to Government’s
Brief, page 3) provides that
The Administrator, under the direction of the
President, shall prepare a comprehensive program of
public works, which shall include among other things
the following: * * * (b) conservation and de-
velopment of natural resources, including” control,
utilization and purification of waters, * * _de-
: - 84
velopment of water power, transmission of electrical .
energy and harbor improvement and flood control * * *.
Thus it is obvious that even had the Administrator de-
sired to, he could not have refused to make loans and grants
for municipal power projects without violating. the statute
under which he was acting. The Act required the inclusion -
of power plants in the public works program, whether the
Administrator approved of that inclusion or not, and no act
or statement of the Administrator: could defeat Congress’ .
desire of having loans and grants made for municipally
owned power projects. Petitioners, it seems, would deny
this. Their argument actually comes to saying that since the
Administrator has indicated a personal approval of muni-
cipal power projects, no loan and grant for such a proj-
ect can be valid, being presumably a furtherance of the Ad-
‘ministrator’s own desires rather than of the will of Con-
gress. If this theory were true and Mr. Ickes had been an
enemy of municipal ownership, he could have completely
defeated the clear language of the Act by the simple expedi-
- ent of announcing publicly that he was in favor of lower
rates and proposed to use his power as Administrator to ac-
complish a lowering of existing rates.
The statute authorized the Aqpinistrator to take as
security for the loans he was insjpucted to make either
_ general obligation bonds or revenue bonds. At the time the
Recovery Act was passed and the Administrator began to
carry out the program, the finances of State governments
and their political subdivisions were in precarious condi-
tion, most of the governmental units having already |
reached state constitutional limits on general obligation
-bonds. Therefore, if the Administrator’ were to make suffi-
cient loans to carry out the purpose of Congress to increase ©
employment throughout the nation, he had to take revenue
bonds which could be financed outside of constitutional debt
limitations, and which necessitated the construction of proj-
ects which would. actually produce revenue. Projects of this
55 -
character are much more likely to.compete with private en-
‘terprise than the ordinary type of projects secured by gen-
. eral obligation bends. The incidental creation, therefore, of :
competition is caused not by the Administrator’s volition
~ but by the necessities of the case.
We come, finally, to the third position assumed by theg
Circuit Court, that is, that even if the Adminisfrator has
the motive attributed to him by the petitioners, and even if
this is an improper motive, the validity of his action is not
affected thereby. The existence of an ulterior motive on the
part of a public officer cannot invalidate his official acts if
_ those acts are within his proper powers.
Dakota Telephone Co. v. South Dakota, 250 U. 8. 163 ~
Spalding v. Dickinson, 161 U. 8S. 483.
West v..Hitchcock, 205 U.S. 80.
De Cambra v. Rogers, 189 U.S. 119.
Philadelphia v. Stimson, 223 U. S., 605.
The principle esfablished by these eases has been re-
7 cently re-affirmed by this Court in the case of Isbrandtsen-
Moller Company v. United States, 300 U. S. 139. The com-
-plainant there charged that an order of the Secretary of
Commerce, despite its recitals: of legitimate purpose,
sprang from illegal motives. The Court in a unanimous
opinion said that the case-was controlled by “‘the principle
that if. the order is justified by a lawful purpose, it is not .
_-rendered: illegal by some other motive in the mintOf the e
officer issuing rt.’’ |
_ Since the first decision of the Circuit Court of Appeals —
in this case holding that the motive of the Administrator
was immaterial and since the opinion in the Isbrandtsen
Case was handed down, the petitioners have changed the
_, name of the element which they claim can be added: to the
Administrator’s admittedly legal actions so as to make
them illegal from ‘‘motive”’ to ‘‘criterion’’. In change the
name, however, they have not changed their argument.
What they are now saying, as we understand it, is this
Syn Np at ey
Nee t-te
tes
rhs
aig
wares y-ide
_~ 56
That sithough the Loan and Grant Agreement with Green-
wood County is on its face legal, it “becomes illegal because
in passing upon the application an illegal criterion has been
used by the Administrator—this criterion being whether
or not existing electric rates will be reduced ‘by on making
of the loan and grant.
To us there is no-real distinction between the meaning ~
of the word ‘‘criterion”’ as now used, and the word ‘‘mo-
tive’’ as formerly used by petitioners in their argument.
What petitioners object to and what they claim will damage
‘them is the alleged requirement that electric rates be re-
duced. Whether. this requirement is manifested in an ille- —
gal criterion or is the result of an illegal motive, it seems
to us to come to the same thing. In all of the cases which we
~ have cited holding that where an Act is within the power
of an officer it is not rendered illegal by any improper in-
tention on the part of that officer, the Court uses the word
‘‘motive’’. It is inconceivable that the result of any of these
decisions would have been changed had the Court substi-
tuted the phrase, ‘‘the applicetion of an extraneous cri-
terion’’ for ‘‘the existgpce of an ulterior motive’’.
Petitioners have themselves conceded that the Admin-
_istrator’s intention is irrelevant by taking the position that,
regardless of the use of this alleged criterion or the exist-
ence of this alleged motive, the necessary and unavoidable
effect of the making of the loan and grant to Greenwood
County would be ajforcing down of their rates through ©
competition. By thegr own argument they will suffer exact-
ly the same results, no matter whether those results were
intended. by the Administrator or not, since competition
flows directly from any administration of the statute that
pean loans and grants for power proj
In other words, petitioners’ a ent comes in its
final analysis toa contention that ‘the collateral effect of
_ the ‘statute can invalidate it, a complete answer to which
o7
ae a >
‘position is found in the Sondinsky Case, supra, and the
eases therein cited. -
If petitioners’ argument is sound that allotments can-
not be made where they will result in lower power rates,
that entire portion of the Recovery Act which provides for
financing projects to develop water power and transmission
of electric energy will fail. If the proposed municipal plants .
must charge higher rates than the competing private utility,
no plants will ever be built and this for two reasons: (1)
_ Local communities would not ask for a plant which would
- result in higher rates than those prevailing in the locality;
and (2) loans from the Federal Government would not be
reasonably secured because the municipal plants would be
unable at higher rates to obtain the business.
VI.
The Petitioners’ Evidence, Consisting of the Testimony
of Frank T. Post, Edwin Vennard, D. E. Byerley
and George Carter and Plaintiffs’ Exhibits
50 to 74, was Not Competent Evi-
dence in This Case
The testimony of these witnesses and these Exhibits
were received by the District Court at the time of the final
hearing but their existence in the Record did not keep either
the ‘District Court or the Circuit Court of Appeals from
holding that the Administrator was not motivated in mak-
ing this loan and grant by any purpose or plan unau-
thorized by the statute. We have, therefore, in our Discus-
sion of ,Facts above, treated this evidence as- properly be-
fore the Court. However, we do believe it was clearly incom-
petent and offen the position that it was improperly in the
Record as additional grounds: to: sustain the decisions be-
low.
This evidence consists of the recounting of conversa-
tions between representatives of power companies and em-
GD RII SANT 9 OG
. ’
58
ployees of the Public Works Administration, .and cor-
respondence between the same parties, with reference to
“. - applications. for loays to municipalities other: than Green-
wood County. Petitidners offered this evidence for the pur-
= pose of showing that the Public Works.Administration in
considering applications from these municipalities did not
grant or refuse allocation of funds om the basis of the stand-
ard set up in Title I]-of the Recovery Act and of the rules
made pursuant thereto, but granted or refused the loans ,
9 upon the basis of whether or not the privaterutility* ‘in that
area would reduce its rates.
_ The most important thing to note is that no testimony
showing any connection between the handling of Green-
a wood County’s application and the handling of the applica-
tion of any of these municipalities was offered: No applica-
tion from South Carolina was included in the group, which
a aa _ consisted of municipalitiés in the mid-west, Texas, Idaho,
and one in Florida. The defendants objected to all this evi-
_ dence upon numerous grounds (R. 572), including the,
’ ground that it was irrelevant; was not admissible as an
admission against interest so far as Greenwood County
was concerned; that it was hearsay; that there was no proof
of the authority of the person writing the letters and mak-
ing the statements; tliat the terms of the contract between
Greenwood County and the Public Works Administration
are clear and the contract itself reqaired no evidence for
- explanatory Joi sma
A. The testimony { is , irrelevant to _ in this case.
The only issue involved’in this case .to which petition-
ers could possibly contend this testimony is relevant is as
to whether the Administrator in making the loan and grant
to Greenwood County (iolated the terms of Title IT of the
National Industrial Recovery Act. Their argument, as We
understand it, is that the testimony is admissible as prov-
ing that the Administrator applied an illegal criterion to all
y
a~s
59
~
applications for municipal power plants ard dientddte
as proving that he applied an illegal criterion to the Green-
~wood County application. In the first place, as we have dem-
onstrated in‘ other portions of this argument, there is no
legal distinction between the alleged existerice of an extra-
statutory criterion used in passing upon applications for
power projects and the alleged existence of an ulterior mo- .
tive in the mind of the Administrator. That an ulterior mo-
tive on the part of a public officer in doing an act which he
has a legal right to do cannot invalidate that.act is settled
by the case of. Isbrandtsen-Moller Co. v. U. S., supra,.and
_authorities referred to therein. The existence of a fotive
or criterion being immaterial, evidence going only to show -
such existence is irrelevant.
_ Petitioners offer this evidence to prove not only the
existence of an extra-statutory criterion but also the appit-
cation of that criterion in the transactions between the Ad-
ministrator and Greenwood County. They are saying that
the testimony of these witnesses proves the application by
the Public Works Administration-of the alleged extra-
statutory criterion in conn®¢tion with some loans and
grants, and that therefore it is proof of the application of
.the same criterion in regard to thé Greenwood County loan
+ and grant. This they contend although the record clearly
shows that’ no criterion other than that prescribed by the
statute was used in the approval of the Greenwood County
application.
We thgnk that netitinnere’ error as to the admissibili-
ty of this evidence lies in ‘the fact that they do not realize
that what they are trying to get from this evidence AS
proof of the actual doing of an act; i. e., the applying of a
non-statutory criterion. There is @ very great difference in
the law. between’ proving what intent accompanied an act,
admittedly done, by evidence as to the intent in the doing. of
similar acts, and in showing the commission of the act it-
<
mete ne
pag eae &
ates
a y
self by such evidence. The. requirements of similarity for
the latter are much mafe exacting.
Dean Wigmore-in his standard work-on Evidence (2d. .
Ed. ), clearly states this proposition, Vol. I, page 617 AR04:
‘When the very doing of the act charged is still to
be proved, one of the evidential facts receivable is the
person’s design or plan to do it. This in turn may be
evidenced by conduct of sundry sorts as welk as by
direct assertions of the design. But ‘where the conduct
offered consists merely in the doing of other similar
acts, it is abvious that something more is required than
the mere ‘shailacity, which. suffices for evidencing in-
tent..The object here is not merely to negative an
innocent intent at the time of the act charged, but to
ie prove a pre-existing design, system, plan or scheme,
> directed forwards to the doing of that act. In the
- former case (of intent) the attempt is merely to nega-
tive the innocent state of mind at the time of the act
charged; in the presght ease the effort is to establish
‘ -a definite prior design gr system which included the
‘ act charged as a part of its consummation. ga ‘the
a - former case, the result is té give a complexion toa 4
3 conceded act, and ends with thats_ia the present case
the result is to show (by ability) a precedent de-
sign which in its turn is fo evidence (by eed )
the doing of the act desjgned.
+» , The element, then, must be not merely a similarity
-in results, but such a concurrence of common features
€ _that the various acts are naturally to be explained as
; caused by a general plan of which they are the in-
dividual manifestations.
The testimony which the petitioners introdngon all
dealt with conferences and communications between,rep
sentatives of the,Public Works Administration and repre-
sentatives of power comipanies which were protesting the
making of. grants to communities which they seryed. If such
conferences or. communications had.taken place in regard
_ to the Greenwood grant the petitioners. must necessarily.
have been parties thereto. Petitioners have offered no evi- |
ee
‘
‘WwW
—_ on this point. says (page 336, § 102):
-
‘61
ie as to negotiations between themselves and the Public
communications testified to by the representatives of: other
power gompanies. This in-itself, we submit, shows such an
obvious dissimilarity between the handling of the Green- ©
wood County application and the handling of the other ap-
plications as to make the er inadmissible. :
Furthermore, the instances hike petitioners cite are
too limited in number and unconnected’to have probative
value even.as to the existence of any plan or scheme or use
of any criterion in the Public Works. Administration, much
less as to its exercise in the approval of the Greenwood
County application. The testimony deals with negotiations
between the Public Works Administration and only four
representatives of power companies. The PWA had han-
died several hundred applications for power projects and
a reasonable percentage of these have been approved. Yet —
with a special sample of a few handpicked cases the peti-
tioners seek to establish a general design or plan of such ©
fixity and purposefulness as to. -evidence the doing of an
act in the Greenwood County case where there is no scin- |
tilla of evidence to show that such act was done. Mr. Wig-
?
The ‘probative value of such a design or plan, for
the purpose of admissibility, will depend chiefly on
two elements, either. of which may -be very weak in a
given instance—the fixedness or absolute quality of
the design, in its subjection to no contingencies or
. ‘conditions, and the specific direction of it to the act
in question, 7. e%, application not merely to a class of
acts indefinitely foreseen, but to the exact deed in
question.
We submit that the testimony introduced by t the peti-
tioners fails absolutely to meet this test and is therefore
—
rks Administration even resembling the confergnces, and.
=
. ete a Rial “
B. The Testimony is Repugnant to the Hearsay Rule
' The test'mony of the wjenesses, Post, Vennay(, Byer-
ley and Carter and the exhibits relative thereto were ob-
jected to as hearsay but the evidence was admitted by the
District Court on the ground that the declarations, letters
and telegrams were statements against the interest of the
Administrator and therefore were not subject to the opera-
tion of the hearsay rule. ©
Although the rules regarding admissions or statements
against. interest had their origin as an exception to the
hearsay rule, they have become so broad and diversified
that they are now usually treated as a part of the substan-
tiye law of evidence, particularly wheye the person making.
the statement is a party to the swit i in ae it is sought to |
be introduced. .
The theory is that where a person has made an admis-
sion or a statement.which is against his interest at that time
or against an intérest Which subsequently develops and is
being maintained in court, that admission or statement is
admissible, not to impeach his testimony, but to contradict
his position. Now, since the statement is made outside of
court, not under oath or subject: to. cross examination, it
is obvious that it must either be made by the person against
whom it ié being introduced, or, if made by his agent, it
must be shown independently that it was made whilé that
agent was engaged in some transaction on behalf of hig
- principal and acting within the scope of his express or im-
plied authority. We submit‘ that this had not been. done in
> regard to the testimony introduced by the petitioners,
The evidence objected to involved only transactions
with the Electric Power Board of Review, and, waless that
Board was acting within the scope of its authority from the
Administrator, nothing that it did is admissible against the
Administrators It should be pointed out that this case |
invéives no rights of a third party who has relied to his
e
ie
detriment upon the declarations or acts of niember# of the
Beard. The petitioners here are strangers tosthe transac-
tions as to Which they seek to introduce testimony. The
. petitioners did not rely on any of the acts or declarations
of the members of the Board by which they now seek to
bind the Administrator. The petitionegs introduce this tes-
timony as to acts and declarations of members of the Board
and contend that they are acts and declarations of the Ad-
ministrator merely to show that the Administrator did cer-.
tain e¢ts, thought certain thoughts, or had certain policies ;
and we submit that the petitioners must first show, by evi-
dence other than the declarations of members of the Board,
that the Board members were acting within the scope of
their actual-or implied authority during these transactions.
This the petitioners | >ve failed ‘to do, and, frém the very
_ nature of the agency, are unable to’ do.
That the authority of the Electric Power Board of
Review was definitely limited to reviewing disapprovals of
power applications and making recommendations to the
Administrator in regard to applications is clearly estab-—
lished by the order ef the Administrator establishing the
Board (Plaintiffs’ Exhibit 46, R. 574). The order did not.
give the Board authority, either express or implied, to. —
. * negotiate with the power companies for the lowering of —
esteanen or to ipdicate to the power companies upon
- what conditions the applications would be approved or dis-
approved, or to make any declarations or announcements
as to the policies of the Administrator: We submit that this -
testimony as to deélarations of the Board members w hile
engaged in unauthorized acts is inacesinsite against the
. Administrator.
In Northwestern Union Packet C Company v. Clough,
20 Wall., 528, this Court said:
Declarations of an agent are, doubtless, in’ sqgme
eases, admissible against his principal, ‘but only: so
: “age
et ey eee nrene ir nt ee <
a
a tee
et ee
64°
>
- far aS he had authority to make them, ~ the au-
_ thority to make them is not necessarily to be inferred
from power to do certain acts.
The petitioners béing strangers to the transaction have
no standing to*put forward the doctrine of apparent au-
' thority because, so far as the petitioners are concerned, the
Board had no apparent authority while dealing with others '
and the petitioners cannot claim the position of one who
has relied to his détriment upon the declarations and ap- :
parent authority of an agent.
Richmond Guano Co. v. Dupont, etc., Co. (C.C. A,
4th), 284 Fed., 803.
_ Maloney Tank M fg. Co. v. Mid-Continent Oil Corp.
(C. C. A., 10th), 49 F. (2d),146. —
There is complete failure on the part.of the petitioners
to show any ratification of the acts and declarations of
members of the Electric Potger Board of Review -testified
to by petitioners’ witnesses. The evidence shows that when
‘the unauthorized acts of the members,of the Board came
to the Administrator’s attention he reprimanded: Mr. Hunt,
the Chairnan of the Board, i in writing {Defendants’ Ex-
hibit 79, R. 714), and ordered the Board ta confine itself —
to the duties for which it had been establiShed. This, in
itself, would refute any argument of ratification, since it
shows that as soon as the knowledge which would be neces-
sary for ratification came to the Administrator he expressly
refused to ratify their acts. The testimqny shows further
(R. 713) that the Administrator subsequently abolished the
Board because he felt, that its members had taken to them-
selves powers which he had not intended for. them to have.
The testimony of the Administrator and others shows
that the use of the words, ‘‘For the Administrator’’
did not ‘mean that the Administrator had authorized’ the
writing cf the letters to which they were appended. That
was merely a form of Signature used throughout one office
TEENIE LIES LOPE DEL CE ERT AGE AEDS A. ry hi ale re
Ws
.
65
and appeared on most of the letters written by PWA em--
ployees (R. 671). ;
Another independent consideration which shows the |
incompetency of the evidence objected to is that the peti-
tioners’ witnesses did not testify as to ations of the Board
but-rather as to statements and representations of the in-
dividual members of ‘the Board. They do not testify as to*
what the Board did in regard to the variéns applications,
but as to what Mr. Hunt or Mr. Rau said in regard to the
_ applications. It is fundamental that when a Board has been
given authority by a superior to act as a Board, it must
act in that capacity if it is to exercise the granted authority.
No effort was made to introduce any evidenee of the action
of the Board regarding any of these municipal applications.
val. ¢
Procedure Adopted by the District Court After the
| _ Petitioners argue that the District Court should have
* limited the scope of the retrial to such changes in the case
as might have intervened since the entry of the origirial
decree. Whether or aot the District Court was right in
fusing to so limit the hearing before it, depends altogether
upon the interpretation, of the order of remand made by
this Court on December 14, 1936 (81 L. Ed., 149). We be-
liéve that the interp taticpeplaced on this order by. the
District Court was edrrect but we shall notcattempt tq
argue to this Court the effect of its own order.
It is our position that the record, even eliminating all
the evidence taken since the original hearing, establishes
our right to prevail against the. contentions of the peti-
tioners, However, we do feel it our duty to point éut that
_when pefitioners state on page 54 and on pages 87, et seq.,
- of their brief, that the motion, pursuant to which the Cir-
cuit Court of Appeals originally remandéd the cause to —
A a
*#
‘
} it pa 7
we | ¥
m
Fs the District Court, contained allegations untrue in a fact, that °
ii they are in error.
. * ee The December 8, 1934, contract contained a provision
(R. 81, 83):
23. Conditions Precedent to the Government’s
= | Obligations. The Government shall be under no obliga-
a tion, to pay for any of the Bonds or to make any Grant:
7. > >
(i) Rate Resolution and Bond Resolution. If the
Borrower shall not have adopted a resolution satisfac-
tory in form and substance to the Administrator, pro-
viding for rates to be charged for services afforded by
the hydro-electric systém, and shail not have adopted
a resolution satisfactory in form and substance to the
Administrator, authorizing the issuance of the Bonds.
The Revenue Bond Acof South Carolina (1933 Acts
' 299, XXXVIITI Stat., 411, 418; Appendix to Government’s |
Brief, page 56) provided:
21. Rates for Service.—Rates for . services fur-
nished by any such system or combined system shall
be fixed precedent to the issuance of the bonds. Such
* rates shall be sufficient to provide for the payment of
the interest upon and the principal. of all such bonds
as and when the same become due and payable, to
create a Bond and Interest Redemption Fund therefor,
to provide for the payment of the expenses of admin-
istration and operation and such expenses for main-
tenance of the system or combined system necessary to
preserve the same in good repair and working order,
to build mp a reserve for depreciatiorf of the existing
system, project o ined system, and to build up
a reserve for impr ents, betterments and exten-
sions of the existing system, project or combined
system, other than those necessary to maintain the
same in good repair and working order as hereinbefore
in this Section provided, Such rates shall be fixed and
revised from time to time so as to produce these
amounts, and the governing body shall covenant and
agree in the ordinance authorizing the issuance of
67
such bonds, and on the face of each bond at all times
to maintain such rates for services furnished by such
system, project or combined system as shall be suf-
ficient to provide for the foregoing, (Italics supplied.)
Judge Watkins, in passing upon this provision of the .
contract (R@122) found: |
7. The rates for the sale of power to be produced
by said Buzzard Roost project were fixed by Green-
wood County, subject to th rroval of the Adminis-
trator, under the terms of the Ioan and grant agree-
ment entered into December 8, 1934, providing that,
as a condition of the loan and grant, the County should
adopt a resolution satisfactory in form and substance
to the Administrator providing for rates to be charged _
for services afforded by the hydro-electric system.
. And again in his opinion of August 10, 1935 (R. 477,
490): |
“It (the December 8th contract) also requires the
fixing of rates agreeable to the Administrator. Strictly
speaking supervision may consist in directing either
‘. what shall or shall not be done.
_. The South Carolina Revenue Bond Act, in the quoted
provision, required the issuing municipality to reserve the
right to revise rates. In our opinion, and in the opinion of
Secretary Ickes (R. 650), the contract of December 8, 1934,
in the quoted provision, referred only to the initial rate
resolution, and did ‘not violate the terms of the State Act.
Judge Watkins’ language, héwever, while not entirely clear,.
is open to the interpretation (81 F. (2d), 986, 989, R. 874),
that he found the language of the cgntract to mean that the
Administrator would have the right-+estipervise the rates
after the original rate resolution. The contract so con-
strued, we submit, wold violate the provisions of the Soutif
Carolina Act; arid while Judge Watkins gid not say in ex-
press language that it violated the South Carolina Act, hig
findings certainly support the position taken in the motion
..for, remand (R. 493) as quoted in the opinion of: the Su-
preme Court (81 L. Ed. 150).- hears aa
‘a | x
*
Se
68
The argument is made in the petitioners’ Brief (page
54) that Judge Watkins, in passing.upon the contract of
December 8, 1934, held that it violated Federal, not State,
law because Judge Watkins’ decision said that all State -
questions had been settled by Park v. Greenwood, 174 S.
C., 35. However, the Park decision was rendered by ‘the
South Carolina Supreme Court on October 31, 1934, and
-thé contract to which reference is made was not entered
into until December 8, 1934. The South Carolina Supreme
’ Court could not, therefore, have passed upon the question
of whether this contract complied with State law. _!
~ \_° CONCLUSION
We eitundt or the reasons above stated that the decree
of the Circuit Court of Appeals: should be affirmed and pe-
titioners’ bill dismissed.
Respectfully submitted,
J w. H. NICHOLSON,
R. F. DAVIS,
JAMES*#. DREHER,
j D. W. ROBINSON, JR.,
Attorneys for Greenwood
County and its Finance
, Board. ,
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