ANALYSIS OF TOBACCO GROWEKS* ASSOCIATION 49 



handling, grading, and marketing the tobacco and setting aside sufficient funds 

 as reserve for credit and other purposes. 



The association was authorized to deliver to any warehousing or other cor- 

 poration organized for cooperation with the association any or all of the tobacco 

 delivered by the grower, for handling, processing, manufacturing or storing. 



The grower agreed to pay the association for all tobacco delivered, consigned, 

 or marketed, or withheld by or for him, other than in accordance with the 

 terms of the contract, the sum of 5 cents per pound as liquidated damages ; and 

 also agreed that in the event of a breach or threatened breach by him of any 

 provision of the contract respecting delivery, the association was entitled to 

 an injunction or to a decree of specific performance. 



CONTRACT VIOLATIONS PROSECUTED 



Although not a primary factor, the ironclad contract under which 

 the member was obligated to deliver his crops to the association for 

 five years, undoubtedly contributed to the dissatisfaction among the 

 members. Marketing contracts are necessary in a cooperative enter- 

 prise handling a business of the nature and scope undertaken by the 

 association, but most cooperatives now include a provision which per- 

 mits a dissatisfied member to withdraw at certain periods during the 

 life of the contract. The wisdom of this provision appears to be 

 amply justified by experience. Certainly, dependence upon a legal 

 tie to hold dissatisfied members in an association has been proved to 

 be a mistaken policy. If a member's dissatisfaction is deep-seated, 

 his own interests and those of the association are best served by the 

 cancellation of his contract. 



There was considerable complaint and criticism because the legal 

 department is alleged to have brought suits for liquidated damages 

 for nondelivery against tenants, insolvent farmers, and negroes, 

 rather than against the larger, richer, and more influential contract 

 violators. In this regard the agricultural investigating committee 

 found that the policy was to bring suits against the larger growers 

 as well as the smaller growers if conditions were such that there was 

 a reasonable chance for the association to win. To prosecute a 

 wealthy grower was more costly, and there was less chance of success. 

 Any decision unfavorable to the association would redound greatly 

 to the harm of the organization. The more intelligent violators were 

 more resourceful in eluding their contracts by such methods as 

 placing the farm or crop in the name of the tenant, or of the wife, or 

 of some other member of the family, or disclaiming ownership of 

 the tobacco by seemingly having rented the farms to other parties, 

 and using other methods of evasion and subterfuge. 



Early in the 1922 receiving season it was thought necessary to take 

 drastic steps against members for violations of contract. It was 

 hoped that if one or two members were held up as an example, other 

 back-sliding members would be deterred from avoiding their obliga- 

 tions. From the outset the decisions of the courts were favorable to 

 the association. Injunctions with or without liquidated damages, and 

 orders for specific performance, were obtained in the lower courts 

 against many members. Some of these cases were later carried to the 

 supreme court on the grounds of constitutionality, but the supreme- 

 court decisions also were in favor of the association. 



During the first three years, 1,196 suits were brought against con- 

 tract violators. By the end of 1924, 459 of these suits had been dis- 



76534—29 4 



