TV A Clear

By three o'clock one afternoon last week the small, highceilinged, brown-paneled U. S. District courtroom on the third floor of Chattanooga's new Federal building was so crowded that even the jury box had filled with spectators. At 3:05 a door opened behind the bench. Out strode the black-robed members of the first of the new three-judge Federal tribunals authorized under the Federal Court Reform Act of 1937 to hear cases involving the constitutionality of an act of Congress. Serious, bespectacled Judge Florence Allen of the Circuit Court of Appeals came first.* Stocky, white-haired District Judge John J. Gore and earnest District Judge John D. Martin followed. Since November 15 they had been hearing the plea of 18 Southern utility companies that the Tennessee Valley Authority be enjoined from the sale of electric power and the TVA Act be declared unconstitutional.

At 3:08 the courtroom fell into a hush as, in a clear, well modulated voice Judge Allen began to read the decision. No sooner had she paused for a first swallow of water than TVA's General Counsel James Lawrence Fly broke into a broad grin. At the utilities counsel table gloom slowly spread over the face of the late Newton D. Baker's Cleveland law partner, William H. Bemis. For by the time Florence Allen, several gulps of water and 70 minutes later, had finished reading it was clear that TVA had scored a monumental legal victory.

Damage Without Injury. Immediate aim of the suit, which Commonwealth & Southern's Wendell P. Willkie and his associates had planned as a last stand in the three-year-old legal fight against TVA, was to stop the sale of electricity generated by the three TVA darns already built (including Wilson Dam started during the War and transferred from the War Department to TVA in 1933); to restrict de-velopment of four dams now under construction and a fifth authorized but not yet begun; to prevent TVA from getting Congressional funds for four more dams. TVA attorneys maintained that the dams were designed primarily for flood-control, improvement of navigation, and national defense. The company attorneys maintained that they were designed primarily to generate and sell electric power and to drive their private competitors out of the utility business.

As expected, the court accepted the wording of the TVA Act and the testimony of TVA experts as proof that the TVA is an all-round waterway development project. The judges then proceeded to inspect TVA's record as a utility business. Since 1934 TVA has made a total net income of $2,087,497 by selling power to 17 municipalities and 15 co-operatives in four States--Alabama, Tennessee, Mississippi and Georgia. Many localities have been helped to buy or build their distributing systems by PWA loans-and-grants of which up to 45% may be outright gifts. This month when the Supreme Court upheld the legality of such PWA assistance, the way was cleared for releasing $146,917,803 in approved grants which had been held up for three years, and a good share of the money went to localities in the TVA area.

As the Supreme Court had flatly upheld PWA's part of this transaction, so last week the Chattanooga court flatly upheld TVA against the companies' contention that it constituted a conspiracy. "Where no fraud, malice, or coercion is shown," ruled the court (after deciding that it had not been shown), "cooperative action by two groups of public officials in administering the provisions of two statutes does not constitute a conspiracy."

On one vital point, however, court and companies were in agreement. Both found that TVA could sell power cheaper* than the private utility companies and, moreover, fully intended to do so, let the private companies suffer as they may. "In view of the inevitable effect of the low rate of the TVA within this area," said Judge Allen and her colleagues, "and the economic necessity forced upon the complainants of lowering their rates to meet the competitive rates of the authority, we conclude that the record presents evidence of substantial future damage to these complainants. Such damage constitutes damnum absque injuria (without legal in-jury). . . ."

Green Light. This decision, barring a reversal by an increasingly New Dealish Supreme Court, was in effect a clear green light for TVA. Far broader than the 8-to-1 Supreme Court decision of 1936, which merely upheld the right of TVA to buy transmission lines from private companies and sell "surplus" power generated by Wilson Dam, it swept away the legal obstacles to a full-fledged public utility program.

Even before the decision was handed down, Commonwealth & Southern's Willkie had issued a dramatic plea to the Government to buy the Southern holdings of his far-flung utility empire outright instead of destroying it (TIME, Jan. 24). To this TVA's hard-boiled Jewish Director David E. Lilienthal was last week pleased to reply that the Government could riot do so, since TVA is not legally empowered to act as a retailer of power. Mr. Lilienthal added, not without irony, that TVA would like to buy as many Commonwealth & Southern transmission lines and would encourage localities to buy as many distributing systems as they could conveniently use.

*At the opening of the case concluded last week Judge Allen bravely led her two colleagues through what she thought was the courtroom door, found herself in a restroom, wheeled, led them up & down several corridors until Judge Gore remarked: "Is there a courtroom in tilt house?"

*In TVA's first "model" co-operative project in Alcorn County, Tenn., for example, there were 1,848 customers using an average 138.7 kilowatt-hours of electricity at 1.82-c- per kwt-hr. by May 1937, as compared to the 1,180 who bought an average 49.4 kwt-hrs. at 5.37-c- from a private company in May, 1934.

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