[Argument of Counsel from pages 291-307 intentionally omitted]
Messrs. John Lord O'Brian and Stanley F. Reed, Sol. Gen., both of Washington, D.C., for respondent Tennessee Valley Authority.
[Argument of Counsel from pages 307-314 intentionally omitted]
Mr. W. H. Mitchell, f Florence, Ala., for respondent City of florence, ala.
Messrs. Thomas W. Martin, Perry W. Turner, and William Logan Martin, all of Birmingham, Ala., for respondent Alabama Power Co.
Messrs. Courtland Palmer, of New York City, and John T. Stokely, of Birmingham, Ala., for respondent Chemical Bank & Trust Co.
Mr. Chief Justice HUGHES delivered the opinion of the Court.
On January 4, 1934, the Tennessee Valley Authority, an agency of the federal government, entered into a contract with the Alabama Power Company, providing (1) for the purchase by the Authority from the Power Company of certain transmission lines, substations, and auxiliary properties for $1,000,000; (2) for the purchase by the Authority from the Power Company of certain real property for $150,000; (3) for an interchange of hydroelectric energy, and, in addition, for the sale by the Authority to the Power Company of its 'surplus power,' on stated terms; and (4) for mutual restrictions as to the areas to be served in the sale of power. The contract was amended and supplemented in minor particulars on February 13 and May 24, 1934.
The Alabama Power Company is a corporation organized under the laws of Alabama, and is engaged in the generation of electric energy and its distribution generally throughout that state; its lines reaching 66 counties. The transmission lines to be purchased by the Authority extend from Wilson Dam, at the Muscle Shoals plant owned by the United States on the Tennessee river in northern Alabama, into seven counties in that state, within a radius of about 50 miles. These lines serve a population of approximately 190,000, including about 10,000 individual customers, or about one-tenth of the total number served directly by the Power Company. The real property to be acquired by the Authority (apart from the transmission lines above mentioned and related properties) is adjacent to the area known as the 'Joe Wheeler dam site,' upon which the Authority is constructing the Wheeler Dam.
The contract of January 4, 1934, also provided for co-operation between the Alabama Power Company and the Electric Home & Farm Authority, Inc., a subsidiary of the Tennessee Valley Authority, to promote the sale of electrical appliances, and to that end the Power Company, on May 21, 1934, entered into an agency contract with the Electric Home & Farm Authority, Inc. It is not necessary to detail or discuss the proceedings in relation to that transaction, as it is understood that the latter corporation has been dissolved.
There was a further agreement on August 9, 1934, by which the Alabama Power Company gave an option to the Tennessee Valley Authority to acquire urban distribution systems which had been retained by the Power Company in municipalities within the area served by the transmission lines above mentioned. It appears that this option has not been exercised and that the agreement has been terminated.
Plaintiffs are holders of preferred stock of the Alabama Power Company. Conceiving the contract with the Tennessee Valley Authority to be injurious to the corporate interests and also invalid, because beyond the constitutional power of the federal government, they submitted their protest to the board of directors of the Power Company and demanded that steps should be taken to have the contract annulled. The board refused, and the Commonwealth & Southern Corporation, the holder of all the common stock of the Power Company, declined to call a meeting of the stockholders to take action. As the protest was unavailing, plaintiffs brought this suit to have the invalidity of the contract determined and its performance enjoined. Going beyond that particular challenge, and setting forth the pronouncements, policies, and programs of the Authority, plaintiffs sought a decree restraining these activities as repugnant to the Constitution, and also asked a general declaratory decree with respect to the rights of the Authority in various relations.