Ashwander v. Tennessee Valley Authority, 297 U.S. 288; 56 S. Ct. 466; 80 L. Ed. 688 (1936)

Facts—The TVA, an agency of the federal government, entered into a contract with the Alabama Power Company, providing for the purchase by the TVA, among other items, of certain transmission lines and real property. Also included in the contract were the interchange of hydroelectric energy and the sale by the TVA to the power company of the surplus power from the Wilson Dam. The plaintiffs, who held preferred stock in the power company, were unable to get results in protesting the contract to the power company. Therefore, they sought a decree restraining these activities as repugnant to the Constitution. The district court issued a decree annulling the contract and the Circuit Court of Appeals reversed.

Question—Is the contract of the TVA with the Alabama Power Company beyond the constitutional power of the federal government?

Decision—No.

Reasons—C.J. Hughes (8–1). The Court first considered the constitutional authority for the construction of the Wilson Dam, which was supported on the grounds that it was constructed under the exercise of war and commerce powers, that is, for the purpose of national defense and the improvement of navigation. Secondly, the Court considered the constitutional authority to dispose of electric energy generated at the Wilson Dam. Here it held that the authority to dispose of property constitutionally acquired by the United States is expressly granted to Congress by Section 3 of Article 4 of the Constitution. This section provides: “The Congress shall have power to dispose of and make all needful rules and regulations respecting the territory or other property belonging to the United States; and nothing in this Constitution shall be so construed as to prejudice any claims of the United States, or of any particular state.”

 J. McReynolds argued in dissent that the national government was improperly exercising powers that were not entrusted to it by the U.S. Constitution.

Note—J. Brandeis’s concurrence set out the “Ashwander Rules,” announcing various maxims of self-restraint that the Supreme Court will generally follow before declaring congressional legislation to be unconstitutional.