Ashwander v. Tennessee Valley Authority, 297 U.S. 288 (1936), was a United States Supreme Court case that provided the first elaboration of the doctrine of "Constitutional avoidance".
Background
In Ashwander, the Supreme Court faced a challenge to the constitutionality of a congressional program of development of the Wilson Dam. The plaintiffs, preferred stockholders of the Alabama Power Company, had unsuccessfully protested to the corporation about its contracts with the Tennessee Valley Authority (TVA). Plaintiffs then brought suit against the corporation, the TVA, and others alleging breach of contract and advancing a broad constitutional challenge to the governmental program. In December 1934, Federal Judge William Irwin Grubb held that the government had no right to engage in the power business except to dispose of a surplus incidental to the exercise of some other constitutional function. While he did not directly rule that the TVA was unconstitutional, he issued an injunction that caused Senator George Norris, prime sponsor of the New Deal's power program, to declare: "The effect of the injunction is practically to nullify the whole TVA Act." In July 1935, the injunction was overturned by the 5th Federal Circuit Court in New Orleans. When the matter reached the Supreme Court, the majority did not reach the broadest constitutional questions presented by plaintiffs, but instead upheld Congress's constitutional authority to dispose of electric energy generated at the dam and validated the contracts.
Majority opinion
At the outset, the majority rejected the government's argument that the preferred stockholders did not have standing to bring the suit because the government program was directly competing with a private company. The majority then considered the scope of the constitutional issue presented. The majority found the scope "limited to the validity of the contract" between the parties, rather than extending to the broad challenge to the validity of the entire TVA program. Although the majority refused to issue an advisory opinion on plaintiffs' broader hypothetical and contingent constitutional claims, it did review the constitutionality of the legislation insofar as the plaintiffs had presented facts of a legitimate "case or controversy".
Based on the concrete dispute before the court, the majority concluded that Congress had the war and commerce power authority to construct the Wilson Dam. The majority also found that the disposal of the electric energy generated pursuant to the provisions of the contracts at issue was lawful. Thus, the judgment in Ashwander, in which Justice Brandeis concurred, ultimately did not avoid a constitutional issue.
Concurrence
Justices Cardozo, Roberts and Stone joined the Brandeis concurrence. The concurring Justices would have affirmed the court of appeals' judgment "without passing on it," although they agreed with the majority's conclusion on the constitutional issues it reached. The court of appeals had decided, like the majority, that Congress had the constitutional authority to construct the Wilson Dam and dispose of the surplus energy thereby produced. The concurrence, however, would have affirmed this judgment without reaching the merits because of other infirmities in plaintiffs' case.
Brandeis primarily objected to plaintiffs' standing. His concurrence disagreed with the majority's conclusion that the preferred stockholders could bring the action because they had already voiced their complaints to the corporation without success. Brandeis concluded that plaintiffs had no "right to interfere" in corporate governance under the substantive law, and because the stockholders could allege no injury which the substantive law recognized, they lacked standing to bring suit.
The concurrence then raised an equity bar to the requested relief. The preferred stockholders could not show the "irreparable injury" to their property rights necessary to obtain relief in equity. Plaintiffs had only a limited interest in the corporation and the district court had made no finding that the proposed transactions with the TVA endangered their property interests.