Bienville Water Supply Co. v. Mobile

Background

A private water company held charters from the 1880s and sued the city of Mobile and the State after later laws and city actions allowed the city to build and operate waterworks and to take possession of a rival plant. The company argued its charter gave it an exclusive right to supply the city and that the later laws impaired that right, so it asked a court to stop the city from building or operating a system.

Reasoning

The Court asked whether the company’s charter actually gave an irrevocable exclusive right that the State could not revoke. It looked at the charter language and the State constitution, which reserved to the legislature the power to authorize other companies and forbade irrevocable special privileges. The Court explained the company kept its tangible property and the right to use it, but the charter did not create a protected monopoly to exclude all competition. Because the exclusive feature could be revoked under state law, the later legislation and the city’s actions did not violate the Constitution as a forbidden impairment of contract. The Circuit Court’s decree was therefore affirmed.

Real world impact

The ruling means a private utility cannot rely on an absolute, unchangeable monopoly in a state charter to block municipal competition. Cities and legislatures keep authority to create competing public works when charters reserve such powers. Companies remain protected in their physical property and in operating rights, but not in a permanent right to exclude all competitors.