City of Chicago v. Mills
Headline: Stockholder wins federal access to challenge Chicago gas-rate cap; Court affirms injunction blocking enforcement of 75¢ per 1,000 cubic feet ordinance, allowing investors to sue despite company refusal.
Holding:
- Lets a shareholder sue a city in federal court over disputed municipal rate limits.
- Blocks Chicago from enforcing the 75¢ per 1,000 cubic feet gas rate ordinance.
- Clarifies that honest stockholder lawsuits do not lose federal access as collusive.
Summary
Background
Darius O. Mills, a California citizen and major stockholder in the People’s Gas, Light and Coke Company (an Illinois corporation), sued the city of Chicago to stop enforcement of an October 15, 1900 ordinance that limited gas charges to 75 cents per 1,000 cubic feet. The gas company had earlier sued and its case was dismissed for lack of federal jurisdiction. Mills filed his own suit on June 8, 1903 after the company’s directors declined to bring a new action to test the ordinance.
Reasoning
The narrow question before the Court was whether Mills’s suit was collusive — brought in secret agreement with the company just to create a federal case — or a genuine, independent action by a shareholder. The Justices reviewed letters, testimony, and the record. They found no proof of concerted fraud or collusion: the company’s board had advised against suing, counsel disagreed about strategy, a contribution by another officer was shown to be a personal payment, and Mills and his lawyers honestly believed a new suit was needed to protect stockholder interests. For those reasons, the Court concluded the case was properly in federal court and that the lower court had been correct to hear it and issue relief.
Real world impact
The judgment affirms that Chicago could not enforce the ordinance in this case and lets the injunction stand. It also means that a shareholder who honestly pursues a federal lawsuit can be heard there even if the corporation declines to sue, provided there is no collusive plan to manufacture federal jurisdiction. This decision turned on the specific facts about who acted and why, not on a broad change to municipal powers.
Dissents or concurrances
Two Justices, Chief Justice Fuller and Justice Harlan, dissented from the Court’s decision.
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