46

In a Kentucky case the restraining order issued by the court was dissolved on the final hearing. In the meantime the tobacco had been stolen. Suit was then brought on the bond, but the court found that the theft of the tobacco was not the natural and proximate result of the issuance of the restraining order and consequently held that there could be no recovery on the bond.

A cooperative may be enjoined in a proper case. When it was found that a father who was a member of a dairy association had in good faith transferred his cows to his son, who was not a member, it was held that the son was entitled to an injunction against the association to prevent it from interfering with the marketing of the milk from the cows.47 Where a cooperative acted in good faith, had discontinued the practices complained of, and the complaint was based on facts which it had voluntarily disclosed, it was not enjoined from violation of Office of Economic Stabilization regulations.48 A milk association was enjoined from interfering with the business of a milk distributor by circulating false statements with respect to his business and from "seeking to induce persons dealing with said defendant to sever or discontinue their business relations with said defendant, for the purpose of injuring the said defendant in the profitable conduct of his business," but on appeal it was held that this did not prevent the association from engaging in organizational work, if this were not done for the purpose of injuring the milk distributor in the profitable conduct of his business. In other words, the purpose for which producers might be solicited to become members of the association would determine the legality of such action.49 In accordance with equitable principles and without specific statutory authority therefor, an Oregon dairy cooperative enjoined a dairy distributor which had contracted to buy all the milk it needed from the association from purchasing dairy products from others; and the fact that a new corporation had been formed for the purpose of avoiding the terms of the contract entered into by a predecessor corporation with the association was held to be immaterial.50 In two cases 51 nonprofit associations of dairymen were not successful in enjoining the enforcement of certain local city ordinances regulating the marketing of milk. In the first case cited the regulation was held valid and in the second case an injunction was denied on the grounds that an adequate remedy at law existed.

A cooperative, like any other business concern, may by injunction protect its trade-marks from unauthorized use.

46

52

Burley Tobacco Growers' Coop. Association v. Pennebaker Home for Girls, 221 Ky. 718, 299 S. W. 734.

47 Wesemann v. Watertown Milk Coop. Association, 222 Wis. 475, 269 N. W. 246. Bowles v. Floodwood Cooperative Creamery Association, 62 F. Supp. 709.

48

49 Pure Milk Producers' Association of Greater Kansas City Territory v. Bridges, 146 Kan. 15, 68 P. 2d 658.

50

Dairy Cooperative Association v. Brandes Creamery, 147 Ore. 488, 30 P. 2d 338, 147 Ore. 503, 30 P. 2d 344.

51

Independent Dairyman's Association, Inc. v. City and County of Denver, 142 F. 2d 415; Farmers' Dairy League, Inc. v. City and County of Denver, 112 Colo. 399, 149 P. 2d 370. Cf. Minor v. City of Keokuk, Iowa, 92 F. Supp. 833; Moultrie Milk Shed, Inc. v. City of Cairo, 206 Ga. 348, 57 S. E. 2d 199.

52

California Fruit Growers Exchange v. Sunkist Drinks, Inc., 25 F. Supp. 401; California Fruit Growers Exchange v. Windsor Beverages, 118 F. 2d 149; California Fruit Growers Exchange v. Gonska, 55 F. Supp. 499; California Fruit Growers' Exchange v. Sunkist Baking Co., 68 F. Supp. 946; California Prune & Apricot Growers Association v. H. R. Nicholson Co., 69 Cal. App. 2d 207, 158 P. 2d 764; Fruit Growers Coop. v. M. W. Miller & Co., 73 F. Supp. 90; Hi-Land Dairyman's Association v. Cloverleaf Dairy, 107 Utah 67, 151 P. 2d 710.

In an Oklahoma case a creamery company failed to give a milk association security to insure the payment for milk and milk products delivered thereto by the association, which the association was authorized to require the company to give. The association then terminated the contract with the company in accordance with its terms. Thereupon the association sought to enjoin the company from buying milk of others. It was held that the association was not entitled to an injunction, as this would have destroyed the company's business and would only have aided the association by destroying the outlet for the milk of competitive milk producers who were not members of the association. The court said that the power of injunction “should not be used merely to punish for a violation of the terms of a contract." 53

It has been held that because farmers were not members of a rural electric membership corporation they were not entitled to restrain the corporation from consummating an agreement with a power company covering the furnishing of electricity.54

In a

The terms of an injunction order should not be broader than the obligation of the member.55 Texas case 56 it was recognized that a grower might be entitled to damages from a cotton association if the association had enjoined the grower from selling cotton that was not covered by the marketing contract of the association.

A failure to comply with an injunction order or a decree for the specific performance of a contract causes the person concerned to be in contempt of court, for which he may be fined or sent to jail. An officer of a cooperative may be in contempt of court for failing to observe an injunction order issued against his association, of which he has notice, but with which he has not been served.57 It is the authority of a court to fine a defendant or send him to jail that gives force to its orders.

Interference With Marketing Contracts

HAT may cooperatives do to prevent third persons from causing their members to breach their contracts?

WH

Independent of statute, it has been repeatedly held that, if one maliciously interferes in a contract between two parties and induces one of them to break that contract to the injury of the other, the party injured can maintain an action against the wrongdoer for damages. 58 A milk bargaining association was allowed to recover damages from a company found to be interfering with its contracts and apparently also was granted an injunction against such interference.59 The company was not required, however, to

53 Tulsa Creamery Company v. Tulsa Milk Products Cooperative Association, 175 Okla. 51, 51 P. 2d 950, 951.

54

55

Bailey v. Carolina Power & Light Company, 212 N. C. 768, 195 S. E. 64.

Pierce County Dairymen's Association v. Templin, 124 Wash. 567, 215 P. 352. 56 Lennox v. Texas Cotton Coop. Association, 55 S. W. 2d 543 (Tex. Com. App.). 57 Mattos v. Superior Court, 30 Cal. App. 2d 641, 86 P. 2d 1056; Pure Milk Association v. Wagner, 363 Ill. 316, 2 N. E. 2d 288.

58 Monte Vista Potato Growers' Coop. Association v. Bond, 80 Colo. 516, 252 P. 813; Angle v. Chicago, St. Paul, Minneapolis and Omaha Railway Co., 151 U. S. 1, 14 S. Ct. 240, 38 L. Ed. 55; Knickerbocker Ice Co. v. Gardiner Dairy Co., 107 Md. 556, 69 A. 405, 16 L. R. A. (N. S.) 746; Wheeler-Stenzel Co. v. American Window Glass Co., 202 Mass. 471, 89 N. E. 28, L. R. A. 1915F 1076; Aalfo Co., Inc., v. Kinney, 105 N. J. Law 345, 144 A. 715.

59

Pure Milk Association v. Kraft Foods Co., 8 Ill. App. 2d 102, 130 N. E. 2d 765. See When Title to Products Passes to the Association, p. 105; Pacific Wool Growers v. Draper & Co., 158 Ore. 1, 73 P. 2d 1391; California Grape Control Board, Ltd. v. California Produce Corporation, 4 Cal. 2d 242, 40 P. 2d 846; Knoxville Milk Producers' Association v. Blake, 171 Tenn. 283, 102 S. W. 2d 64.

comply with an attempted partial assignment of sales proceeds (dues of three cents per hundredweight) contained in the marketing contract, since this "check-off" clause was considered too burdensome on the company.

The court enjoined a trucking company, in a Rhode Island case,60 from delivering the milk of its members residing in Connecticut, except as prescribed by the association.

In a Wisconsin case,61 in which a cooperative enjoined a dealer in tobacco who actively and intentionally tried to induce members of the association to breach their contracts, the supreme court of that State said: "We consider the law well settled that one who maliciously induces another to breach a contract with a third person is liable to such third person for the damages resulting from such breach."

In a later case,62 a livestock shipping association was granted an injunction against a third person who had purchased livestock from one of its members enjoining him from making any further purchases from association members. The association also was allowed to recover the actual damages sustained because the livestock was not marketed through the association.

In a Texas case 63 and in a North Carolina case 64 suits were brought by each association involved against members and dealers who were handling or offering to handle its products with knowledge of the fact that the products were covered by contracts with the association, and in each of these cases the members were enjoined from disposing of their products outside the association and the dealers were enjoined from interfering with the performance of the contracts. The cooperative cases cited above were all decided under the general principles of equity and independent of statutory provisions.

In an Iowa case,65 it was held that a cooperative had stated a cause of action for an injunction against a third person for engaging in allegedly unfair trade practices with intent to injure the cooperative even though the State statute made the acts complained of criminal offenses.

In addition, many of the statutes providing for the formation of cooperatives make it a misdemeanor knowingly to induce the breach of a marketing contract and authorize associations to recover a penalty of $500 for each such offense. They authorize also the recovery of a similar penalty for knowingly spreading reports about the management or finances of an association. 66

In a New York case an association failed to recover the statutory penalty because apparently the court was of the opinion that the reports that were

60 Local Dairymen's Cooperative Association v. Potvin, 54 R. I. 430, 173 A. 535. See also Northern Wisconsin Coop. Tobacco Pool v. Bekkedal, 182 Wis. 571, 197 N. W. 936; Dairy Cooperative Association v. Brandes Creamery, 147 Ore. 488, 30 P. 2d 338, 147 Ore. 503, 30 P. 2d 344.

61

Northern Wisconsin Coop. Tobacco Pool v. Bekkedal, 182 Wis. 571, 197 N. W. 936, 939. See also Phez Co. v. Salem Fruit Union, 103 Ore. 514, 201 P. 222, 205 P. 970, 25 A. L. R. 1090; Monte Vista Potato Growers' Coop. Association v. Bond, 80 Colo. 516, 252 P. 813; Wilson v. Monte Vista Potato Growers' Coop. Association, 82 Colo. 428, 260 P. 1080.

62 Neillsville Shipping Association v. Lastofka, 225 Wis. 350, 274 N. W. 280. 63 Hollingsworth v. Texas Hay Association, 246 S. W. 1068 (Tex. Civ. App.). 64 Tobacco Growers' Coop. Association v. Pollock, 187 N. C. 409, 121 S. E. 763. 65 Farmers Cooperative Association v. Quaker Oats Co., 233 Iowa 701, 7 N. W. 2d 906.

66

See secs. 26 and 27 of the Bingham Cooperative Marketing Act of Kentucky, p. 307 of Appendix.

alleged to be false were of a creditable nature, or were not false within the meaning of the statute.67

Sections 26 and 27 of the Bingham Cooperative Marketing Act of Kentucky were upheld by the Supreme Court of the United States in a case arising in Kentucky,68 in which the Burley Tobacco Growers' Cooperative Association recovered a penalty of $500 from a warehouse company that sold tobacco that was covered by a marketing contract of the association. "Before the sale the association notified the warehouse company of Kielman's membership and of his marketing contract, requested it not to sell his tobacco, and called attention to the prescribed penalties." Similar provisions in the cooperative acts of Colorado 69 and Virginia 70 were upheld in those States.

In an Arkansas case 71 it was held that before an association could recover the statutory penalty from a person who had purchased commodities from one of its members that were covered by its marketing contract, the association must show that the purchaser had actually induced the member to sell them.

The Supreme Court of Minnesota held that a similar penalty section in one of the cooperative statutes of that State was unconstitutional because it violated the freedom-of-contract provisions in the State and Federal Constitutions. In reaching this conclusion, the court said:

72

Of course, it is well settled that a malicious interference by one not a party to a contract to induce its breach is a tort for which redress may be had. * * * But section 27 does not stop with those who maliciously interfere with existing contracts between third parties. *** In other words, the section attempts to prevent all dealings between members of a cooperative marketing association and outsiders in respect to products contracted for by the association, no matter how free from legal malice or devoid of inducements the conduct of the outsiders may have been, provided they knew that the product was under contract.

In a Colorado case 73 a competitor of a cooperative inserted advertisements in a local paper relative to the decline in the price of cabbage. As the statements in these advertisements apparently were considered to be simply an honest expression of opinion, it was held that they did not violate an injunction order which, among other things, forbade interference with “any of the business of the exchange." In other words, the court held that the injunction order quoted was too broad or that it should be confined to instances of illegal interference. In an Oregon case, in which the members of a cooperative had disabled the association from fulfilling a contract which it had made with a buyer of loganberries by failing or refusing to deliver their loganberries to the association for marketing, the court held that the buyer had a cause of action against the association and

€7

74

Dairymen's League Coop. Association, Inc. v. Brockway Company, 18 N. Y. S. 2d 551, 173 Misc. 183.

68

Liberty Warehouse Co. v. Burley Tobacco Growers' Coop. Association, 276 U. S. 71, 48 S. Ct. 291, 72 L. Ed. 473, affirming 208 Ky. 643, 271 S. W. 695.

Fort v. People ex rel. Coop. Farmers' Exchange, 81 Colo. 420, 256 P. 325; Rinnander v. Denver Milk Producers, Inc., 114 Colo. 506, 166 P. 2d 984.

70

Tobacco Growers' Coop. Association v. Danville Warehouse Co., Inc., 144 Va. 456, 132 S. E. 482.

71

Loewer v. Arkansas Rice Growers' Cooperative Association, 180 Ark. 484, 22 S. W. 2d 17.

12 Minnesota Wheat Growers' Coop. Marketing Association v. Radke, and v. Commander Elevator Co., 163 Minn. 403, 204 N. W. 314, 315. See also Schwartz v. Rice County Cooperative Egg and Poultry Association, 163 Minn. 515, 204 N. W. 316. 13 Fort v. People ex rel. Coop. Farmers' Exchange, 81 Colo. 420, 256 P. 325. also Western Seed Co. v. Cooperative Farmers' Exchange, 81 Colo. 448, 256 P. 329. Phez Co. v. Salem Fruit Union, 103 Ore. 514, 201 P. 222, 205 P. 970, 25 A. L. R.

74

1090.

See

412528°58

11

153

against the members, because they had prevented the association from performing its contract.

Virginia 75 and Kentucky 76 have enacted statutes, sometimes referred to as "True Name Laws," that require warehousemen to keep records showing the true names of the owners of tobacco they have for sale, and permitting the inspection of such records. It was claimed by opponents of this legislation that the purpose of the statutes was to enable cooperatives to ascertain if their members were disposing of tobacco to others. These statutes have been upheld."

79

In a number of States provision is made for the filing of record of marketing contracts for the purpose of giving constructive notice of the rights of the associations.78 Although a defendant in one case sought to avoid an injunction on the ground that the marketing contract in question had not been properly filed and indexed as required by law, the court found it unnecessary to consider this question. It said that the proven facts were such as to have put the defendant on actual notice of the contract.

It should be kept in mind that a cooperative may not unlawfully interfere with the right of third persons to contract even though it is simply attempting to advance its interests.80 A legitimate end does not justify illegal means.

Transfers in Attempts To Avoid Contracts

TTEMPTS have been made by members of cooperatives to "transfer" Their fans and thus avoid their marketing contracts by conducting their farming operations in the names of their wives or other persons. The courts have repeatedly declared that marketing contracts may not be avoided in this way. The real test in cases of this character depends upon whether the transfer involved was one in fact, or one in form only. In other words, was the transfer simply a colorable transaction or a transfer in good faith? If subsequent to the alleged transfer, the farming operations were conducted in substantially the same manner as they were before the transfer, then the courts hold the transfer ineffective,81 and the crops grown are subject to the marketing contract. On the other hand, if the farming operations subsequent to the transfer are in fact conducted by the wife of a member, as was done in a Virginia case, in which the wife leased a

75 Code of Virginia 1950, sec. 61-146 to 61-153, inc.

76

Kentucky Revised Statutes, 1953, sec. 248.430.

"Reaves Warehouse Corporation v. Commonwealth, 141 Va. 194, 126 S. E. 87; Motley v. Commonwealth, 141 Va. 194, 126 S. E. 87; Danville Warehouse Co., Inc. v. Tobacco Growers' Coop. Association, 143 Va. 741, 129 S. E. 739; Jewell Tobacco Warehouse Co. v. Kemper, 206 Ky. 667, 268 S. W. 324.

78 See ante, p. 109.

80

19 Neillsville Shipping Association v. Lastofka, 225 Wis. 350, 274 N. W. 280. Hy-Grade Dairies v. Falls City Milk Producers' Association, 261 Ky. 25, 86 S. W. 2d 1046; Pure Milk Producers' Association of Greater Kansas City Territory v. Bridges, 146 Kan. 15, 68 P. 2d 658; Wesemann v. Watertown Milk Coop. Association, 222 Wis. 475, 269 N. W. 246; State v. Standard Oil Company, 130 Tex. 313, 107 S. W. 2d 550.

81

Burley Tobacco Growers' Coop. Association v. Devine, 217 Ky. 320, 289 S. W. 253; Dark Tobacco Growers' Coop. Association v. Alexander, 208 Ky. 572, 271 S. W. 677; South Carolina Cotton Growers' Coop. Association v. English, 135 S. C. 19, 133 S. E. 542; Oregon Growers' Coop. Association v. Lentz, 107 Ore. 561, 212 P. 811; Kansas Wheat Growers' Association v. Lucas, 128 Kan. 350, 278 P. 6; Kansas Wheat Growers' Association v. Loehr, 125 Kan. 491, 264 P. 735; Rinnander v. Denver Milk Producers, Inc., 114 Colo. 506, 166 P. 2d 984.