In the 1935 case of Ashwander et al. v. Tennessee Valley Authority et al., the U.S Supreme Court ruled in favor of the Tennessee Valley Authority (TVA), upholding its constitutionality and affirming its right to sell surplus power generated by a government-built dam on navigable waters to private companies. The plaintiffs, preferred stockholders in Alabama Power Company, had argued that TVA's contract with their company was unconstitutional because it exceeded Congress' commerce powers and encroached upon states’ rights under Tenth Amendment. However, Justice Brandeis delivered an opinion for a unanimous court stating that since there was no coercion involved in making contracts between TVA and private corporations, these agreements were not infringing upon state sovereignty or violating any constitutional provisions. This decision marked an important milestone for New Deal legislation as it validated federal intervention into what traditionally had been areas of local concern.

In the dissenting opinion for Ashwander v. Tennessee Valley Authority, Justice Benjamin N. Cardozo argued that the Court should not have decided on constitutional issues when other grounds were available to resolve the case. He believed that by ruling on these broader constitutional questions, they had overstepped their judicial boundaries and ventured into policy-making territory which is reserved for Congress. Furthermore, he disagreed with the majority's interpretation of congressional power under the Commerce Clause and felt it was too expansive in this context. He also expressed concern about potential conflicts of interest arising from government-owned corporations competing with private businesses.